Ntis 2016 36181p

Nepal Trade Integration Strategy (NTIS) 2016

Executive Summary and Action Matrix

Ministry of Commerce Government of Nepal Singha Durbar, Kathmandu 2016

Table of Contents

Table of Contents ....................................................................................................... i List of Tables ........................................................................................................... ii NTIS Review and Update Steering Committee .................................................. iii Contributors ............................................................................................................ iii Abbreviations and Acronyms ................................................................................ iv 1. Introduction ....................................................................................................... 1 2. Lessons and Challenges to Nepal’s Export Development and Trade Competitiveness ..................................................................................................... 2 3. Objectives of the Strategy ............................................................................... 5 4. Strategic Outcomes of NTIS 2016 ................................................................. 5 5. Recent Trade Performance and Market Access Conditions ....................... 6 6. Non-Tariff Measures and Other Cross-Cutting Issues ................................. 9 7. Priority Export Potentials ............................................................................... 13 8. Analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT) of Priority Export Potential Goods and Services ................................................ 16 9. Implementation Mechanisms for NTIS 2016 ............................................... 28 10.

Monitoring and Evaluation ......................................................................... 31

11.

NTIS 2016 Action Matrix ............................................................................ 32

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List of Tables Table 1: Development Goal and Strategic Outcomes of NTIS 2016 ................. 5 Table 2: Exports, Imports and Inflow of Remittance............................................ 6 Table 3: Nepal's Goods Export by Major Destination ......................................... 7 Table 4: Nepal's Foreign Market Access Indicators ............................................ 8 Table 5: Comparative Analysis of Quality of Transport Infrastructure of Nepal ................................................................................................................................ 10 Table 6: Competitiveness of Nepalese Trade Facilitation (Export) within Region, 2013 ......................................................................................................... 10 Table 7: Criteria and Weightage for selecting priority export potential goods & services .................................................................................................................. 13 Table 8: Priority Export Potential Sectors ........................................................... 14 Table 9: Export Performance and Inclusive Sustainable Development Impact ................................................................................................................................ 14

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NTIS Review and Update Steering Committee Mr. Naindra Prasad Upadhaya, Secretary, Ministry of Commerce (MoC) Mr. Toya Narayan Gyawali, t Secretary, MoC Mr. Jib Raj Koirala, t Secretary, MoC Mr.Udaya Chandra Thakur, t Secretary, MoAD Mr. Laxman Aryal, t Secretary, MoF Ms. Yam Kumari Khatiwada, t Secretary, MoI Mr. Rishiram Sharma, t Secretary, OPMCM Mr. Dilli Raj Ghimire, t Secretary, MoLJPA Mr. Durga Bahadur Subedi, t Secretary, MoFA Mr. Lal Shankar Ghimire, t Secretary, NPC Ms. Jacqualine Groth, Deputy Chief, German Embassy Kathmandu (DF) Mr. Pashupati Murarka, President, FNCCI Mr. Narendra Kumar Basnyat, President, CNI Dr. Posh Raj Pandey, Chairman, SAWTEE Mr. Buddhi Prasad Upadhyaya, Under Secretary, MoC

Chairperson Member Member Member Member Member Member Member Member Member Member Member Member Expert Member Member Secretary

Contributors Dr Thierry Noyele, New York, International Consultant PACE Nepal Pvt. Ltd, National Consultant, the following experts contributed: Mr. Prachanda Man Shrestha, Team Leader, National team of consultants Dr. Binod Karmacharya, Mr. Ganesh Dawadi, Mr. Manohar Bhattarai, Mr. Poorna Prasad Manandhar, Mr. Rojan Bajracharya, Ms. Romi Manandhar, Mr. Shaleen Khanal Thanks to Chairperson of then EIF National Steering Committee (Chief Secretary of GoN) and its ; Mr. Leela Mani Paudyal, former Chief Secretary, GoN; Chairperson of NTIS Review and Update Steering Committee and its ; former Secretary of MoCS Mr. Madhav Prasad Regmi; former Secretary of MoCS Mr. Narayan Gopal Malego; former t Secretary of MoF Mr. Rajan Khanal; former t Secretary of MoFA Mr. Nirmal Raj Kafle; former t Secretary of MoAD Mr. Vijoy Kumar Mallik; Mr. Purushottam Ojha, former Secretary, GoN; representatives of diplomatic missions and international organizations located in Kathmandu and present in donor group meetings; Dr. Ratnakar Adhikari, Executive Director, EIF Executive Secretariat at the WTO, Ms. Christiane Kraus, Chief Coordinator, EIF Executive Secretariat at the WTO; all contributors (national and international); Mr. Ravi Bhattarai, Under Secretary, GoN; Mr. Deepak Raj Pandey, Under Secretary, MoC; Mr. Nava Raj Dhakal, Under Secretary, MoC; Mr. Chhabindra Parajuli, Under Secretary, MoC; Mr. Deepak Ghimire, Under Secretary, MoI; Mr. Mahesh Bhattarai, Under Secretary, GoN; Mr. Dhruba Ghimire, Under Secretary, MoC; Dr. Pradyumna Raj Pandey, Under Secretary, MoAD; Mr. Pabitra Dangol, Computer Officer, MoC; Ms. Sharadha Chalise, Section Officer, MoC; Ms. Shova Ojha, Section Officer, MoC; Dr. Vidur Ghimire, National Programme Manager, NECTRADE Project, MoC; Mr. Pankaj Giri, Project and Policy Analyst, NECTRADE Project, MoC; Mr. Saroj Acharya, & Finance Associate, NECTRADE Project, MoC; Mr. Ayush Ghimire, Programme Officer, Trade Promotion Program, GIZ; Dr. Badri Bastakoti, Value Chain Development Advisor, Trade and Private Sector Development Project, MoC; and all stakeholders consulted through the various levels of consultations.

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Abbreviations and Acronyms ABS

Access and Benefit Sharing

FDI FNCCI

Foreign Direct Investment Federation of Nepalese Chambers of Commerce and Industry FY Fiscal Year GA Good Agricultural and Collection Practice GAP Good Agricultural Practice GATS General Agreement on Trade in Services GDP Gross Domestic Production GIs Geographical Indications GIS Geographical Information Systems GIZ Gesellschaftfür Internationale Zusammenarbeit GoN Government of Nepal HAC Hazard Analysis and Critical Control Points ICD Inland Clearance Depot ICT Information Communications and Technology IEC International Electrotechnical Commission INGOs International NonGovernmental Organizations

ADB Asian Development Bank AEO Authorized Economic Operator’s AfT Aid for Trade ASYCUDA Automated System for Custom Data BPO Business Process Outsourcing CAAN Civil Aviation Authority of Nepal CDC Cardamom Development Centre CMMI Capability Maturity Model Integration CRMSAP Customs Reform and Modernization Strategies and Action Plan CTEVT Council for Technical Education and Vocational Training DADOs District Agriculture Development Offices DFID Department for International Development DFTQC Department of Food Technology and Quality Control DLS Department of Livestock Services DoA Department of Agriculture DoC Department of Customs DoFE Department of Foreign Employment DoI Department of Industry DoIED Directorate of Industrial Entomology Development DoSCI Department of Small and Cottage Industries DPR Department of Plant Resources EIF Enhanced Integrated Framework EU European Union

IPRs ISO

Intellectual Property Rights International Organization for Standardization IT Information Technology ITES Information Technology Enable Services LDCs Least Developed Countries LFGMAN Leather Footwear and Goods Manufacturing Association of Nepal MAPs Medicinal and Aromatic Plants MoAD Ministry of Agricultural Development MoC Ministry of Commerce MoCTCA Ministry of Culture, Tourism, and Civil Aviation iv

MoF MoI MoLE

Ministry of Finance Ministry of Industry Ministry of Labor and Employment MoU Memorandum of Understanding MRLs Maximum Residue Levels MT Metric Tons NABCB National Accreditation Board for Certifying Bodies NABL National Accreditation Board for testing and calibration Laboratories NAC National Airlines Corporation

NSC National Steering Committee NSCDP National Spice Crop Development Program NTCDB National Tea & Coffee Development Board NTIS Nepal Trade Integration Strategy NTMs Non-Tariff Measures OHS Occupational Health and Safety OPMCM Office of the Prime Minister and Council of Ministers PCA Post Clearance Audit PDTA Patent, Design and Trademark Act PPP Public–private partnership PVPFRA Plant Variety Protection and Farmers’ Rights Act SAARC South Asian Association for Regional Cooperation SOTTO Society of Travel and Tour Operators SPS Sanitary and Phyto-sanitary SWOT Strengths, Weaknesses, Opportunities and Threats TBT Technical Barriers to Trade TEPC Trade and Export Promotion Center TFA Trade Facilitation Agreement TIA Tribhuvan International Airport WTO World Trade Organization

NARC Nepal Agricultural Research Council NATHM Nepal Academy of Tourism and Hotel Management NATO Nepal Association of Tour Operators NBSM Nepal Bureau of Standards and Metrology NEPLAS Nepal Laboratory Accreditation Scheme NGOs Non-Governmental Organizations NGPTA Nepal Ginger Producers and Traders Association NIU National Implementation Unit NPC National Planning Commission NPIA Nepal Pashmina Industries Association NRB Nepal Rastra Bank

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1. Introduction Trade has been well recognized globally as an important driver of economic growth and inclusive development. Over the years, Nepal has taken series of initiatives to promote exports so as to achieve sustainable and inclusive economic growth, poverty reduction, and improvement in the living standard of the Nepalese people. Nepal validated its first Diagnostic Trade Integration Studies (DTIS) as the Nepal Trade and Competitiveness Study (NTCS) in 2004. The study analyzed Nepal's trade regime and performance, and identified products with comparative and competitive advantage. The country developed and adopted Nepal Trade Integration Strategy (NTIS) 2010 as an updated version of NTCS 2004 that basically focused on development of 12 goods and 7 services areas for making the trade inclusive and equitable; contributing to the poverty reduction goal adopted by the government. NTIS 2010 also charted actions and interventions in cross-cutting areas and priority export potential sectors aimed at increasing exports. Despite efforts to implement sectoral policies and measures ive of value chain development, trade mainstreaming, and enhancement of export competitiveness, Nepal’s trade performance over a decade remained less satisfactory resulting huge deficit in trade in goods. Poor performance of Nepal’s trade is mainly attributed to supply-side constraints, low investment, in adequate trade infrastructure and trade facilitation measures, among others. Persistent deficit in trade in goods and deteriorating of trade has posed challenges in achieving inclusive and sustainable economic growth. Nepal Trade Integration Strategy (NTIS) 2016 is Nepal’s third generation trade integration strategy. NTIS 2016 seeks to address the outstanding trade and competitiveness challenges confronted by the country’s export sector. This Strategy, thus, focuses on identifying Actions to address protracted constraints in a number of cross-cutting areas. They include: i. ii. iii. iv. v. vi. vii.

Institutional capacity building for trade, including capacity for trade negotiations Business environment for investment and trade Trade and transport facilitation Standards and technical regulations Sanitary and phyto-sanitary measures Intellectual property rights Issues related to trade in services

Moreover, NTIS 2016 recognizes potentials for product and value chain development in the following priority export sectors: i. ii.

Agro and forest products (cardamom; ginger; tea; and medicinal & aromatic plants) Craft and manufacturing products (all fabrics, textile, yarn and rope; leather; footwear; chyangra pashmina; and, knotted carpets)

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iii.

Services (skilled and semi-skilled professionals at various categories; Information Technology and Business Process Outsourcing (IT & BPO); and tourism - leisure, business, education, medical)

Similarly, fruits and vegetables; all fabricated steel and metals; lentils; silver jewelry; instant noodles; paper products; wool products; honey; readymade garments; coffee; semi-precious stones; and hydro-electricity have also been identified as other potential sectors. NTIS 2016 has been formulated in close complementarity with the new Trade Policy, 2015.

2. Lessons and Challenges to Nepal’s Export Development and Trade Competitiveness As part of its initial task to formulate NTIS 2016, GoN conducted a thorough review of progress and shortfalls following the implementation of NTIS 2010. The review noted:  The implementation of NTIS 2010, including the work of the several interministerial committees responsible for various priorities and Actions, has helped mainstream trade priorities in the policies, programmes and activities of line ministries and agencies;  The implementation of NTIS 2010 has provided a forum to enhance collaboration among Government, private sector, Development Partners, civil society and other stakeholders on trade related matters;  NTIS 2010 has helped create greater awareness among farmers, producers and product associations about priority export potential products;  There has been reasonable progress in areas of trade facilitation and capacity development on various trade related matters;  Government of Nepal has been allocating budget for the implementation of NTIS 2010 Action Matrix;  from the Enhanced Integrated Framework (EIF) has been mobilized for value chain development of Pashmina, Ginger, and Medicinal and Aromatic Plants (MAPs); and,  Technical and financial from Development Partners including World Bank, Asian Development Bank, European Union, GIZ, DANIDA, DFID, and USAID was mobilized to focus on a number of the key Actions identified in NTIS 2010 Action Matrix, mainly but not exclusively in areas of trade related infrastructure and capacity development. Despite such achievements, the detailed review of NTIS 2010 and the analytical work conducted as part of NTIS 2016 revealed number of significant challenges and constraints to export development and trade competitiveness of Nepal as follows:

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 Adoption of key legal and regulatory reform measures to create trade and investment enabling environment remains rather slow due to the prolonged political transition in the country. Delays in revising or adopting necessary Acts and Rules often held back implementing business ive plans and policies.  Nepal has been facing difficulties in addressing key transportation and energy infrastructures constraints. Limitations in ive physical infrastructure triggers a negative impact on export sectors as it erodes price competitiveness. The absence of an integrated multi-modal transport plan often leads to uncoordinated attempts at fixing current weaknesses rather than efficiently addressing the issues. Moreover, the difficulties are further compounded by Nepal's landlocked position and absence of regional transit agreement in South Asia. The potentials for significant hydropower expansion have long been identified, but yet to be optimally harnessed due to various reasons. The Power Trade Agreement signed with India in October 2014 followed by the announcement of investment by India in two hydropower projects could be game changers. Still, surplus hydropower may not be available for export until the end of 2017. Seasonal power trade with India will likely begin if the power generation and distribution projects are completed successfully.  NTMs have been serious bottlenecks for Nepalese products to get easy access in international markets. Nepal configured regulatory and institutional framework, however, lacks comprehensive architecture for mobilizing resources to fulfill SPS and TBT requirements.  Inadequate legal framework to protect intellectual property rights along with the limited use of existing protections by the Nepalese producers and exporters have negative impacts on product competitiveness. Sectors such as medicinal and aromatic plants (MAPs) with rich natural endowment and strong export potential have been hugely affected due to this reason.  Nepal lacks clear, well-coordinated, and institutionalized value-chains to maximize value addition in potential export sectors. For instance, different stages of value-chain of leather products, from animal farming to slaughtering, slaughtering to processing of hides and skins, and manufacturing of finished products, are governed by various policies and strategies in uncoordinated manner. The same can be referred to chyangra pashmina and knotted carpets, where possibility of linking mountain goat and sheep farming to wool processing and then to finished products remain mostly underutilized. Engagement of private sector is crucial to implement Actions that have been identified to promote value-chain integration and development.  Nepal lacks sufficient investment in modern technologies for processing of priority export potentials. Attracting foreign investment to expand manufacturing base and technology transfer to ensure quality products remain additional challenge to the trade sector development.

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 As most commodities are being exported unprocessed, Nepal has missed the opportunity of exporting high value finished products in the neighbouring countries and beyond due to the lack of product development plan.  Agro and forest-based products with high export potential lack ive investment in modern storage and processing technologies.  NTIS 2016 indicates opportunities for expanding cultivation of a number of potential agro-commodities such as tea, ginger and medicinal plants to new geographical areas. Yet, constraints in the physical infrastructure, including inadequate road connectivity and transportation, are limiting the expansion of cultivation areas.  Exports of remittance-generating services are valued for their significant contribution to poverty reduction. However, the sector is also ascribed to creating domestic labor shortages, especially shortages of semi-skilled human resources. In most cases, returnees come back with better skills and with some capital to invest. There is a challenge to increase the contribution of returnees by providing employment opportunities in existing industries and by encouraging and ing them to establish own business.  Most of the service sectors lack a focus on international trade and service sector policies are mostly oriented towards fulfilling domestic requirements rather than export.  Given the context of limited institutional capacity and inadequate resources, large number of priority export products was observed to be rationalized while updating the Strategy so as to ensure focused activities on product and value chain development.  The implementation of NTIS 2010 fell short of expectation mainly because of partial execution of recommended Actions, especially in the area of product development. This was mainly due to responsible agencies not specified for product specific recommendations, sector associations not being strong enough for adequate advocacy, inadequate resources, and absence of resultbased monitoring mechanism.  Coordination among line agencies remains bleak due to lack of clear ability mechanisms to ensure effective implementation of ResultsBased Management and Reporting system.  Technical and financial s from Development Partners have been mobilized mainly but not exclusively in areas of trade related infrastructure and capacity development. However, there is a need for extending additional mainly in the area of product and value-chain development of priority export potential goods and services, and trade related infrastructure. In this regard, NTIS 2016 needs a strong buy-in from Development Partners to promote value chain development and integration as well as to strengthen trade infrastructures.

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3. Objectives of the Strategy To substantially enhance trade sector's contribution to GDP through trade-centered growth and to overcome the constraints and challenges associated with trade development and export promotion, the NTIS aims at achieving the following objectives: 1. Strengthen trade and export enabling environment 2. Focus on product development and strengthen supply capacity of priority products 3. Strengthen institutional capacity, trade negotiation and inter-agency coordination 4. Build and enhance trade related infrastructures

4. Strategic Outcomes of NTIS 2016 To address the challenges and constraints of Nepal’s export promotion and trade competitiveness, NTIS 2016 identifies Actions organized under 19 strategic Outcomes. The 19 strategic Outcomes and their respective Actions will guide the implementation of NTIS 2016 in the coming months and years. The 19 Outcomes are summarized in Table 1 below: Table 1: Development Goal and Strategic Outcomes of NTIS 2016

Development Goal Development Goal: Increase the contribution of export potential goods and services to the national economy through improved trade enabling environment and strengthened value chain development of priority export potentials

Strategic Outcomes Cross-Cutting Issues Outcome 1: Trade Capacity, including Trade Negotiation A strong capacity ive of trade development including in areas of trade negotiation in place Outcome 2: Trade and Investment Environment ive policy and business environment for trade and investment in place Outcome 3: Trade and Transport Facilitation Nepal's export competitiveness increased through improved trade and transport facilitation Outcome 4: Standards and Technical Regulations Increased competitiveness of the Nepalese exporters through strengthened lab and testing facilities Outcome 5: Sanitary and Phyto-sanitary Standards The competitiveness of the Nepalese exporters of agro-based products increased through enhanced capacity to meet international standards Outcome 6: Intellectual Property Rights Increased number of the Nepalese producers using IPR protections as a competitiveness factor Outcome 7: Trade in Services Competitiveness of the Nepalese service sector increased

Potential Export Sectors Outcome 8: Large Cardamom Volume and value of export of Large Cardamom increased

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Outcome 9: Ginger Volume and value of exports of Ginger increased Outcome 10: Tea Export of Tea significantly increased Outcome 11: MAPs Exports of MAPs increased through the improvements in value chain development Outcome 12: Fabrics, Textile, Yarn and Rope Exports of synthetic yarn, synthetic woven fabrics and jute fabrics and bags steadily increased Outcome 13: Leather Production of raw hides and exports of processed hides increased rapidly Outcome 14: Footwear Production and export of Footwear significantly increased Outcome 15: Chyangra Pashmina Exports of Chyangra Pashmina products expanded significantly Outcome 16: Knotted Carpets Exports of Knotted Carpets regained a strong footing through market and product diversification Outcome 17: Skilled and Semi-Skilled Professional at Various Categories (RemittanceGenerating Services) Proportion of skilled/semi-skilled professionals in total out-migration increased and remittance inflow efficiently utilized Outcome 18: IT Services and Business Process Outsourcing New market for IT & BPO sector developed and export increased significantly Outcome 19: Tourism Number of foreign visitors, their average duration of stay, and per capita expenditure increased significantly

5. Recent Trade Performance and Market Access Conditions Growth of merchandise exports of Nepal during 2009/10 to 2012/13 remained marginal at an annual rate of 2.09 percent. Meanwhile, services exports grew at an annual rate of 12.42 percent during the period and inflow of remittances grew by at an even larger annual rate of 16.16 percent. In the meantime, imports of goods rose at an annual rate of 15 percent and import of services grew at an annual rate of 6.73 percent (Table 2). In short, trade in services outperforms trade in goods during the reported period and steady growth of remittance contributed to maintaining the balance of payment. However, the deficit in trade in goods has increased continuously and posed a challenge to achieving trade-led sustainable economic growth. Table 2: Exports, Imports and Inflow of Remittance 2002/03-2012/13 (in USD Million) Average Annual Growth

Year & Growth 2003/04

2006/07

2009/10

2012/13

Rate (%) 2002/03-

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2009/10-

Categories

2008/09

2012/13

Goods Export FOB

748.35

872.18

848.02

977.16

5.88

2.09

Service Export

464.99

455.02

686.18

1081.71

14.72

12.42

Inflow of Remittance

793.87

1420.49

3110.41

4938.43

26.83

16.16

Total

2007.21

2747.69

4644.61

6997.30

17.45

12.93

Goods Import CIF

1800.95

2701.24

4922.05

6219.25

15.27

15.00

342.02

573.85

906.12

995.51

22.79

6.73

2142.97

3275.08

5828.17

7214.76

16.40

13.33

Service Import Total

Source: NRB, Multiple years (adapted)

Analysis of the destination markets for the Nepalese goods exports shows varying results (Table 3). There has been slight increment in share of export to India between 2003/4 and 2012/13, still covering nearly two-third of Nepal's export. The United States and the European Union are the two other large markets for the Nepalese exports and rate of growth of exports particularly to the United States has been encouraging. Similarly, a rapid growth in emerging economies like China, Turkey, and Thailand is promising for Nepalese export. However, the share of exports to those three countries as well as other emerging economies in Asia seems relatively low. Therefore, focused and country specific export promotional programs are required in view of such prospects available in the region.

Table 3: Nepal's Goods Export by Major Destination (in percentage)

S.N.

1 2 3 4 5 6 7 8 9 10 11 12 13

Country

India United States of America China P.R United Kingdom Bangladesh Turkey Japan Italy Canada Australia Netherlands

2003/0 4

Growth# (Pre NTIS 2010 Period*)

Growth# (NTIS 2010 Period*)

2006/07

2009/1 0

2012/13

57.05

70.81

65.47

66.95

6.32

2.88

17.97 6.61 4.35

9.45 4.37 0.64

6.34 3.92 1.65

7.43 3.57 2.81

-13.55 -5.61 -5.46

10.20 1.60 22.08

3.11 0.78 1.08 0.49 0.97 1.09 1.01 0.18 0.53

1.69 0.88 1.53 0.30 0.95 1.16 1.01 0.35 0.42

2.02 5.54 1.89 0.45 0.91 1.18 1.26 0.55 0.42

2.05 3.53 1.36 1.36 1.24 1.02 0.83 0.54 0.48

-3.94 60.74 13.56 11.37 0.90 6.76 6.91 33.86 -3.52

9.42 -16.90 -3.44 36.05 9.24 1.27 -4.99 6.31 9.13

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S.N.

Country

14 15 16 17

Thailand U.A.E Switzerland Spain Hong Kong 18 SAR 19 Belgium Other 20 Countries Total Goods Export

2003/0 4

Growth# (Pre NTIS 2010 Period*)

Growth# (NTIS 2010 Period*)

2006/07

2009/1 0

2012/13

0.19 0.15 0.57 0.38

0.05 0.25 0.54 0.65

0.04 0.42 0.61 0.30

0.52 0.38 0.26 0.30

-27.02 46.71 -4.62 -0.04

92.09 2.16 -7.12 10.94

0.14 0.48

1.40 0.32

0.61 0.44

0.46 0.26

30.47 2.88

-8.92 -3.38

2.85 100.00

3.21 100.00

5.99 100.00

4.64 100.00

14.62 4.06

-0.57 3.03

#

Source: TEPC, Growth rate calculated using actual data from ITC Note: *Pre-NTIS 2010 Period means FY 2003/04 to 2008/09. NTIS 2010 Period means FY 2009/10 to 2013/14

Most of the Nepalese products enjoy more favorable access to international markets. Nepal ranked 3rd among 138 countries in 2013 in of market access and 2nd in of margin of preferences. This fact indicates that tariffs are not a significant deterrent market access factor for the Nepalese products in international markets (Table 4). Table 4: Nepal's Foreign Market Access Indicators

Indicators External environment MATTRI applied tariff (%) (including preferences) ROW applied tariff (%) (including preferences) - trade weighted average

2008

2011

2013

Rank/125 Value

Rank/132 Value

Rank/138 Value

5

4.9

3

4.7

20

5.1

20

4.9

3

67.9

2

80.6

124 17.5

5.3

Foreign market access index (1-7) Tariffs faced (%) Index of margin of preference in destination markets (0-100)

Source: World Trade Indicators 2009/10, World Bank; The Global Enabling Trade Report 2014, World Economic Forum

The primary reason for favorable market access through tariffs is the result of various multilateral, regional, and bilateral trade agreements to which Nepal is a party. For instance, the Treaty of Trade between Nepal and India provides access to the Indian market for Nepalese products at a zero tariff rate, except for a small negative list, and as long as they meet specific rules of origin. Market access to other SAARC member countries is facilitated under the South Asian Free Trade Agreement 8

(SAFTA). Similarly, as a Least Developed Country (LDC), Nepal is eligible for preferential treatment under Generalized Systems of Preference (GSP) and therefore enjoys lower tariffs than the Most Favored Nation (MFN) tariffs. Nepal enjoys duty free quota free access to European market under its ‘Everything but Arms’ (EBA) initiative as well as in the Chinese market as long as the goods meet rules of origin and technical requirements, including SPS standards.

6. Non-Tariff Measures and Other Cross-Cutting Issues Despite Nepal’s access to various preferential schemes, it has not been able to take advantage of full benefits of these schemes mainly due to difficulties in meeting the stringent non-tariff measures requirements of the importing countries. Various nontariff as well as para-tariff measures pose challenges for easy access to destination market. Similarly, domestic constraints and challenges are also hindering the Nepalese traders from accessing international markets. Furthermore, reducing gap between preferential and non-preferential tariffs in the importing countries has negatively affected Nepalese exports. Preference erosion over the years can only be offset by increasing competitiveness of exportable goods and services. Most of the export products including the priority products identified by NTIS 2016 face NTMs related problems; especially, sanitary and phyto-sanitary related barriers on agriculture and forest-based products, technical barriers to trade on craft and manufacturing products, and legal and regulatory requirements on trade in services. As discussed under Challenges to Nepal’s Export Promotion and Trade Competitiveness Section, Nepal has been slow in amending trade and investment related legislation and regulations both to comply with its WTO obligations and to create conducive business environment, new investment, and growth of exports. NTIS 2010 identifies a list of about one hundred trade-related legal reforms to be completed. Out of these, about 25 reforms have been completed until the end of year 2014 while others are in the process of being completed. The lag in adopting such reforms significantly impacts the ability of line ministries in implementing the policies due to the absence of ive legislation, among others. Given the critical role of transport and trade facilitation in the overall trade performance of Landlocked and Least Developed Countries (LLDCs), Nepal needs to continue to modernize and reform in a number of trade facilitation areas including the modernization of customs operation. Significant progress has been made in this regard and Nepal has a well designed plan for continued customs reform. Priorities are well identified and understood so the focus is primarily on further implementation of relevant reforms. Equally, if not more important, is the need for Nepal to strengthen its domestic transport system and border infrastructure in order to reduce the cost of transportation and transaction. Key indicators of trade and transport facilitation in of quality of transport infrastructure and cost of trading across borders are presented in Table 5 and 6. They show that Nepal lags significantly behind its South Asian neighbors on a great many of the indicators, save perhaps Bangladesh.

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Table 5: Comparative Analysis of Quality of Transport Infrastructure of Nepal Indicators

Nepal

Rank Quality of roads 115 Quality of air transport 129 Quality of rail transport N/A Available airline seat 80 millions km/week Overall Quality of Transport 126 Infrastructure

Bhutan

Bangladesh India

Rank 56 110 N/A 141

Rank 117 127 75 59

Rank 76 71 27 12

Sri Lanka Rank 32 56 42 55

53

130

90

37

Source: World Economic Forum, The Global Competitiveness Report 2014-2015

Table 6: Competitiveness of Nepalese Trade Facilitation (Export) within Region, 2013 Stages (Export)

Customs clearance and inspections Documents preparation Inland transportatio n & handling Ports & terminal handling Total

Nepal

Bhutan

India

180

Banglades h $ Day Cost s 6 150

Day s

$ Cost

4

300

Day s 3

$ Cost

14

295

16

350

14

225

18

165 0

13

135 0

4

4

300

6

350

40

254 5

38

223 0

Sri Lanka $ Cost

Day s

130

2

$ Cos t 160

8

365

9

135

350

3

400

2

115

5

600

3

225

3

150

29

1325 16

112 0

16

560

Day s 2

Source: World Bank, 2014 Note: Days and US$ costs required for moving one 20 ft container

The chapter on Trade and Transport Facilitation in NTIS 2016 presents a detailed list of areas requiring attention, including but not limited to: a) Introduction of a multi-modal transport plan b) Development of a domestic railway system c) Increased spending for road maintenance and investment in new highways and transport infrastructure d) Continued modernization of customs procedures and facilities, including the introduction of a Single Window system

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e) Rationalizing and lowering expenses at the Birgunj ICD in order to make it price competitive for exporters and traders f) ing Birgunj ICD with the World Maritime Organization as a dry port in order to recognize Bills of Lading issued at the ICD g) Negotiating a South Asian Regional Transit Agreement Most, if not all, priority export sectors identified in NTIS 2016 must meet Sanitary and Phyto-Sanitary (SPS) standards in the case of agriculture and forest based products or technical requirements in the case of craft and manufacturing products. This largely requires adoption of internationally harmonized standards and the development of appropriate quality infrastructure or easy and cost-competitive access to quality infrastructure for testing and certification. Nepal is making progress in getting accreditation of some of the Government laboratories for some parameters useful for agricultural and industrial products. Still, the range of accredited parameters falls short of what is needed for full international certification for a large number of export products. Many producers must secure testing and compliance certification from overseas labs raising their cost of doing business and affecting their price and time competitiveness. In the area of SPS, it is important to recognize that quality assurance is a “value-chain” issue and not something that is solely controlled at the end of the manufacturing process at central laboratories. Going forward, continuing to improve the quality assurance infrastructure available to Nepalese producers requires progress on several fronts including, but not limited to: a) Improve the legislative and institutional framework for the enforcement of quality assurance b) Accelerate the process of international accreditation of national testing procedures and certifying national laboratories c) Strengthen inspection and testing facilities, as well as specialized human resources at central and provincial levels. d) Introduce traceability schemes in agro-export sectors and increase efforts to encourage producers and processors to adopt HAC, ISO 22000 FSMS and ISO 14000 standards Another critical area of non-tariff measures is the protection of Intellectual Property Rights (IPRs). As part of its commitments of accession to the WTO, Nepal is bound to meet the obligation under the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement of the WTO. Various key Intellectual Property legislations need to be updated and/or made compliant with WTO obligations, starting with amending the existing Patent, Design and Trademark Act 2022 (BS) or promulgating a new Industrial Property Act permitting the use of utility models, geographical indications (GI), and other rights included in the aforementioned agreement. Nepal lacks a number of critically important intellectual property laws to protect its genetic resources, including medicinal and aromatic plants (MAPs) in which Nepal is richly endowed with and highly demanded in international markets. The IP chapter in the full report points to a number of Actions to be taken, including but not limited to:

11

a) Amend extensively or replace the current Patent, Design and Trademark Act b) Finalize and adopt the Plant Variety Protection and Farmers Right Act as well as the Access to Benefit Sharing Act c) Amend the Seeds Act d) Establish an IP Board or a separate IP Authority integrating all IP responsibilities. At present, IP responsibilities are scattered among several ministries which tends to undermine the ability of Government to bring strong focus and resources to this important area e) Organize more effective campaigns to explain the importance of and encourage the use of IP protections, including collective trademarks or other tools, among priority export sectors f) Make use of the preferential treatment opportunities for LDCs included in the WTO TRIPS Agreement. Nepal has yet to draw benefits from any of the preferences open to it under TRIPS. Furthermore, the performance of MoC as the lead agency to develop overall trade sector has been affected due lack to the skilled and motivated human resources, experienced trade negotiators and functional institutional mechanism to effectively mobilize domestic resources and development assistance in a coordinated manner. Additionally, as trade sector development requires involvement of various government agencies at different stages, the individual and institutional capacities of such agencies, and inter-agency coordination among them are not adequate for the growth of this sector. Similarly, the performance of the private sector is also held back due to inadequate human and institutional capacities. In addition to the trade negotiations capacity constraints, there is a dearth of skilled negotiators with a clear understanding of international laws and conventions including the rights of access of land-locked states to and from the sea and freedom of transit while dealing with trade-transit related issues amongst others. In view of improving the institutional development and trade negotiation capacity, there is a need to focus on, but not limited to: a) Strengthen the individual capacity of the officials of the MoC and other government agencies to deal with various trade-related matters b) Improve inter-agency coordination among government agencies, private sector and Development Partners c) Monitor and evaluate of the implementation of trade-related policies and strategies at regular intervals d) Enhance the representation of MoC in strategic forums and mainstream trade as one of the priorities of Nepalese missions abroad. Finally, despite service sectors has outperformed trade in merchandize goods, enough attention has not yet been given to enhance the sector and exploit its full potential. The capacity of domestic service providers to meet the requirements of the importing countries is limited. Also, the priorities of the government agencies related to services are mainly in fulfilling domestic demands rather than focusing on export. As remittance has been playing a major role in maintaining balance of payment, it is necessary to shift the focus from unskilled to semi-skilled and skilled professionals to create a sustainable growth in services export. 12

In order to improve the services exports, the following issues could be focused on, but not limited to: a) Take necessary actions for the recognition of qualifications, skills and experiences of Nepalese service providers by the importing countries b) Negotiate to relax economic needs and labor market test requirements being faced by Nepalese services and service providers in importing countries c) Take necessary legal and regulatory reforms related to service trade in order to facilitate Nepalese service providers to explore and exploit potential market d) Utilize the provision of Service Waiver that has been already notified by more than 20 developed and developing countries

7. Priority Export Potentials NTIS 2016 has identified priority export potential goods and services based on the two broad criteria- i) export performance, and ii) inclusive and sustainable development. The criteria applied for the selection of priority export potential goods and services are mostly similar to that of NTIS 2010 with some additional parameters complemented by inputs from various stakeholders provided through consultations. The detailed of the criteria and the respective weightage are shown in Table 7 below: Table 7: Criteria and Weightage for selecting priority export potential goods & services Criteria/Parameters

Weightage (%)

I. Export Performance Export size Export growth Export potential index Potential value addition Potential destinations diversification Sub-total II. Inclusive and Sustainable Development Geographical regions Environmental impact Employment generation Gender impact Skills intensity and income generation Sub-total Total (I + II)

15 20 20 15 10 80 4 4 4 4 4 20 100

The twelve sectors with the highest score were selected as priority export potential sectors and the focus of in-depth analyses in the Strategy. Based on the scoring approach described above, nine goods sectors (four agro based and five craft and manufacturing based) and three services were selected as shown in Table 8below. It should be noted that fewer priority sectors were identified for NTIS 2016 compared to NTIS 2010. The reason for the further prioritization from 19 to 12 sectors is a lesson learnt from the implementation of NTIS 2010. It is important to focus the attention of stakeholders on a manageable set of priority value chains to ensure that sufficient 13

capacity and resources are available for the complex tasks of realizing the desired outcome of sustainable export growth, benefitting poor and marginalized groups. Table 8: Priority Export Potential Sectors Priority Export Potential Sectors Cardamom Ginger Tea Medicinal and Aromatic Plants All Fabrics, Textile, Yarn and Rope Leather Footwear Pashmina Carpets Skilled and Semi-Skilled Professional at Various Categories (Remittance Generating Services) IT & BPO and IT Engineering Tourism (including leisure, business, education, and medical)

Agro-based products

Craft and manufacturing products

Services

HS Codes 090830 091010 0902 1211 5509, 5407, 6305 4104, 4106 6404 6214 5701

All agro-based goods and pashmina in the list of NTIS 2016 priority export potentials were in the list of priority sectors in NTIS 2010. Likewise, skilled and semi-skilled professional at various categories, IT& BPO, and tourism services were also selected in NTIS 2010. Yarn, footwear, leather products, all textile products, and knotted carpets are new products selected in the priority list of NTIS 2016.

Environm ent

Employme nt Impact

Women

Skills+ earning

High

Medium

Low

Medium

High

Medium

Low

Potential Destinatio n

High

Potential Value Addition

Medium

EPI

Medium

Export Growth

Cardamom

Sectors

Export Size

Regions

Table 9: Export Performance and Inclusive Sustainable Development Impact

Agro-Based Goods

Ginger

Low

Medium

High

High

Medium

High

High

High

Medium

Low

Medicinal Plants

Low

Low

High

Medium

Medium

Medium

High

Medium

High

Low

Tea

Low

Low

High

High

Medium

Medium

Low

High

High

Medium

Low

Medium

Low

Medium

Craft and Industrial Goods All Fabrics, Textile, Yarn,

High

Low

High

Medium

14

Medium

Medium

Medium

Medium

Medium

Medium

High

High

Medium

Footwear

Low

Leather

Low

Medium

Skills+ earning

High Medium

Medium

Women

Potential Destinatio n

Low High

Pashmina

Employme nt Impact

Potential Value Addition

Medium

Environm ent

EPI

Low

High

Regions

Export Growth

High

Export Size

Low

Carpets

Sectors

Low

Low

High

High

Low

Low

Low

Medium

High

Low

Low

Medium

Low

Low

Medium

Medium

Low

Low

Low

Medium

and Rope

Services Skilled & Semi-Skilled Professional

High

High

High

Medium

Medium

High

Low

High

Low

High

Tourism

High

Low

Medium

Medium

Medium

Medium

Low

High

Medium

High

IT&BPO, IT engineering

Low

Medium

High

High

High

Low

Medium

Low

Low

High

In addition to receiving in-depth focus in the analysis presented in NTIS 2016 Full Report, the twelve sectors will receive priority attention for implementation of Actions in the coming years. Other Export Potentials& Continuation from NTIS 2010 It needs to be ensured that the implementation of sector-specific Actions identified in NTIS 2010 should continue for sectors no longer included in NTIS 2016 priority list. In addition, stakeholders consulted during the formulation of NTIS 2016 indicated additional interest for a short list of sectors not included among the 12 sectors identified through the scoring approach. The result is a hybrid list of other export sectors deserving new or continued attention: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Hydro-electricity All fabricated steel and metals Coffee Fruit and vegetables Honey Instant noodles Lentils Paper products Readymade garments Semi-precious stone Silver jewelry Wool products

15

8. Analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT) of Priority Export Potential Goods and Services SWOT analysis was developed based on in-depth study of each of the twelve priority export sectors identified in NTIS 2016. The SWOT and the detailed sector analyses presented in the Full Report were used to identify required courses of actions for value chain development and promotion of the priority export potentials. Those actions are reflected in the Action Matrix of NTIS 2016.

SWOT Analysis: Large Cardamoms Strengths 

Weaknesses

Nepal is one of the largest



producers and exporters 

manpower

High value agro-product with



increasing demand in global 

of modern processing and

employment for farming

storage facilities 

Suitable geographical and

Inadequate supply of improved seeds and seedlings

climactic conditions ,mainly in hilly



districts 

Limited value addition due to lack

Significant source of income and household, including women



Weak linkages of Research and Extension

market 

Inadequate specialized

Inefficient internal quarantine facilities

Cardamom production helps to



prevent soil erosion

Limited supply of tissue culture seedlings and high price

Opportunities 



Threats

Possibility of production area



Managing disease/pests

expansion along hilly region



Pricing mechanism

Possibility of productivity



Higher dependency on a single

enhancement 

market

Possibility of establishing



processing facilities for value addition 

Development of disease free seedlings



Higher demand on third country 16

Climate Change

SWOT Analysis: Ginger Strengths 



Weaknesses

Significant source of income and



Inadequate quality seeds

employment for small farming



High crop loss due to diseases

families



Limited storage and processing

Fourth largest producer of ginger

facilities

in the world 



Lack of internationally accredited

Possibility of inter–cropping with

laboratory with sufficient test

other agriculture items

parameter



Favorable geo-climatic conditions



Nepalese ginger regarded as high



Limited skilled human resources

quality in world market Opportunities 

Increasing global demand



Potentiality of higher productivity

Threats 

pest (Rhizome rot, rhizome fly)

and area expansion 



Incidence and control of disease-



High price fluctuation Cheap and

Due to rich in oil and oleoresin,

quality ginger being produced in

high potential for value addition

neighboring countries may result

Rising demand in Ayurvedic

in loss of market share

medicine and other uses

17

SWOT Analysis: Tea Strength 



Weakness

Special and unique geography



No brand identity in global market

and climate suitable for tea



Ineffective marketing and publicity

cultivation



Lack of internationally accredited

Strong and functional farmer

laboratories

cooperatives 



Most of large tea estates produce

centers and R&D

organic tea 



Strong Tea Associations and

Lack of transparent mechanism to determine price for green tea

related organizations with



capacity to lobby and advocacy 

Limited technical schools, training

Inconsistent quality of product to meet buyers' demand

National Tea Policy already in place



ive policy of the Government Opportunities











Threats

Scope of production area



expansion

producers, Eg. China, India,

Good opportunities for

Bangladesh& Sri Lanka

employment creation



Price volatility

Increasing Global demand for



Unable to meet delivery

Nepalese tea

requirements including quality

Organically certified areas are

control such as meeting MRL

expanding

regulations in destination markets 

Attractive price for organic tea in

High dependency on a single market

the global market 

Competition with major tea



Scope for product diversification and brand value in niche markets

18

Problems due to labor unions

SWOT Analysis: Medicinal and Aromatic Plants (MAPs) Strengths 



Weaknesses

Organic and unique, as most of them



are collected from wild

framework to protect Nepal’s

Most of the species are endemic to the

genetic resources

Himalayan region 





Lack of policy and system to

There is a huge variety of MAPs found

implement Good Agriculture and

in Nepal

Collection Practices (GA) 

Source of employment and income to remote regions

Very few products currently being cultivated

significant number of population in the



Incomplete legal and institutional



Lack of storage and processing facilities

Well documented sector, with large number of studies done on potentials



as well as benefits at all stages of the

High dependency on exports to neighbouring countries

value chain



Lack of accredited quarantine facilities at the customs points



Inadequate Pest Risk Analysis for major products, and insufficient fumigation facilities

Opportunities 

Threats

Expanding world markets for organic



herbs

Lack of knowledge on sustainable collection practices



High potential for expansion



Potentials to capture greater share of

threatening the very existence of

value in the overall global value chain

some species unique to Nepal



through improved collection, storage



and processing facilities

Unsustainable harvesting is

Weak Intellectual Property protection is leading to loss of rights on indigenous knowledge

19

SWOT Analysis: Fabrics, Textiles, Yarn, and Ropes

Strengths 

Competitive labor available



Good quality equipment and

Weakness 

production process

machineries available 

Higher costs and inefficient



Insufficient and irregular supply of electricity

Stable market in India (except for jute products)



Lengthy customs procedures



High quality products



Insufficient domestic production of



Good relationship with importing

jute

partners



Lack of market diversification

Opportunities

Threat



Growing international markets



New and emerging markets with low

the Indian market due to existing

tariffs for Nepal

regulations



Growing preference for organic





packaging (in case of jute)

20

Lack of demand for jute products in

Falling jute production in the country

SWOT Analysis: Leather Strengths 

Weaknesses

Well accepted in the world due to unique



grain, fiber structure and texture of

collection in the country

buffalo hides and goat skins 





Weak management of raw material



Difficulties in maintaining quality of output

Expansion of the meat and dairy sector

hides and skins due to poor practices in

is a Government priority

animal grazing and slaughtering

Some tanneries capable of producing



Poor supply chain

high exportable quality leather



Trend of consuming meat with skin

Growing domestic market for footwear and leather articles

hindering the supply of raw material 

Poor technical know-how to produce quality finished leather



Weak institutional capacity for technology innovation, human resources development and R&D



Customs duty on the import of raw hides and skin for processing in Nepal

Opportunities 

Threats

Value addition potential for growth and



diversification 

higher quality products

Opportunities for large employment



generation 

Potential to grow as capacity utilization low High demand for wet-blue leather in international market due to export-ban by neighboring countries



Growing demand in the international market



Lack of a strategy to mitigate environmental impact

of leather tanning industries is currently



Competition from other countries with

Good use of a byproduct of a growing meat industry

21

SWOT Analysis: Footwear Strengths 



Significant number of footwear

Weaknesses 

Higher import tariffs on some of the

manufacturers in the sector

raw materials compared to import

High employment opportunity due to

taxes on finished products

labor intensive nature





Low labor cost





Good quality



Female workers friendly



Skill development opportunities for

some machines like imported leather

youths in short period of time (three

measuring machine, logo embroidery

to six months)

machine, lasting machine, several

Low investment in machinery equipment due to high costs



Lack of common facility center for

stitching machine and quality test lab Opportunities 

Increasing demand in global market



Growing use of diversified footwear products in the market









Shortage of trained labor due to outmigration



good quality Nepalese footwear 

Insufficient control over imported pirated brand

Growing awareness of domestic consumers for cheap, durable and

Competition due to price, quality, and volume from China and India

Growing domestic market with potential of expansion



Threats

High dependency on imported raw material

Easy access to raw material (approximately 20 percent domestic and 80 percent from India and China)

22

SWOT Analysis: Chyangra Pashmina Strengths 



Successful introduction of the

Weaknesses 

Lack of modern yarn dyeing plant and

"Chyangra Pashmina" mark for

facilities causing difficulties in product

branding by Nepalese producers

diversification

Traditional manufacturing methods,



Difficulties to adapt in changing

quality and designs are unique selling

market demand due to use of

points for Nepalese products in niche

traditional technology

market



Import of wool at higher price due to



High employment opportunities

lack of yarn processing plants in wool



Ability to handle small high value

producing regions

orders



Lack of silk production in Nepal



Low labour cost

necessitates import of silk at higher



Excellent long term relationships with

prices from India 

buyers

Weak networking in international market, thereby limiting ability to explore new markets or further penetrate existing ones

Opportunities 

Significant spare capacity to increase

Threats 

production and export to new regions 

Potentials to expand in existing and

India 

new markets 

Potential to increase goat farming

Shortage of skilled labor due to very large outmigration



and invest in domestic yarn producing to increase import substitution in wool 

Price competition with China and

Demand for diversified Pashmina products are (beyond shawls and stoles) increasing

23

Counterfeit products harming image

SWOT Analysis: Knotted Carpet Strengths

Weaknesses



Strong socio-economic impact



Strong brand image in international



markets 

higher than its competitors 

Lack of quality testing and certification mechanisms

The quality of Nepalese carpet is considered to be higher than that



of its competitors; carpets of 150



Cost of Nepalese carpets is relatively

Long lead time compared to competitors

knots are rarely produced



Low labor productivity

elsewhere



Insufficient market diversification

Nepalese designs are appreciated



Price fluctuation of imported inputs

worldwide 

Availability of carpet design software in the country



Customized production and no restriction on minimum order quantity (MOQ) as in machine made carpets Opportunities





Threats

Emerging markets in the Middle East



and Asia

markets of Nepalese carpets owing

Establishment of a collective

to slowdown in world economy

trademark can ensure protection



Emergence of cheaper alternatives

against misuse of Nepalese brand



Misuse of Nepalese brand name by

name 

manufactures in other countries

Significant room for improvement in



productivity of workers 

Labor shortages owing to outmigration

Items like Allo (Girardina diversifolia) and hemp are unique to Nepal and so, carpets made from them have niche market opportunity



Declining global demand in existing

Preferential market access as an LDC

24

SWOT Analysis: Skilled and semi-skilled professional at various categories (Remittance generating services) Strengths 

Weaknesses

Nepalese human resources are



Limited or no skills

cost competitive in the global



Poor and protection

market 

system for migrating workers

High supply potential of Nepalese



human resources 



Weak protection for Nepalese migrant workers

Crucial role of remittance in



High costs of migration

poverty reduction through income



High social cost for families

generation



Inadequate and incentive

At macro-economic level,

for returning migrants

remittances provide valuable foreign exchange and, therefore, mitigate the possible effects of trade in goods deficit 

Low cost of remittance transfer



Returnees bring skills back to Nepal and are major potential of entrepreneurship

Opportunities 







Threats

Well-established social networks



Fall in oil prices and economic

help new migrants identify

slowdown might reduce demand

employment opportunities

and wages in the Middle East

Training future migrant workers



Shortages of work force in the

can improve their skills and

domestic market due to out-

income potential

migration

Role of Migrant Workers’ Welfare



Conflict and crisis in major labor

Fund can be expanded to make it

importing countries will change

a potential source of investment

the scenario

Existing popularity of hard-



working and disciplined nature of

Low levels of investment of income generated from migration

Nepalese professionals

25

SWOT Analysis: IT & BPO Strengths 

Weaknesses

Significant cost advantage of human



resources as compared to competitor countries 

of target clienteles and market segments 

Demographic advantage (young

English language proficiency



Improved connectivity

Insufficient strategy for skills development

population in employable age bracket) 

Lack of coherent sector strategy in term



Relatively high cost of broadband internet



Insufficient and irregular supply of electricity



Poor IPR, data and privacy protection regime

Opportunities 







Threats

Growing global demand for IT &BPO



services

human resources leading to brain drain

Growing emphasis on trade in services by 

Unstable labor relations and strikes

Government of Nepal

limiting ability to scale up the sector

Conducive international trade regime,



Disruptive technological changes,

including WTO service waiver for LDCs

especially automation, impact entry level

Fast developing telecommunications

opportunities in BPO markets

sector including competitive broadband development 

Limited domestic opportunities for skilled

Nepalese diaspora provides an IT footprint in overseas markets

26

SWOT Analysis: Tourism Strengths

Weaknesses

 Abundant existence of natural and

 Lagging capacity expansion relative to

cultural attractions, religious sites, World Heritage sites

targeted volume of tourists  Limited capacity of a single international

 Established image of adventure, and

airport in the country (TIA in

cultural interest in emerging markets

Kathmandu) to accommodate growing

 Hospitable and welcoming nature of

national and international traffic

Nepalese as destination hosts

 Poor surface transport infrastructure

 Operation of air services by foreign

and limited road networks

airlines connecting numerous cities in emerging market

 Congestion at touristic sites due to absence of destination site

 Priority of the Government for the

management

development of sustainable tourism

 Lack of local travel industry's capacity to

 Favorable policies and institutional

penetrate international market directly

arrangements

 Lower quality of tourism services in

 Private sector investment fairly

hotels, restaurants, local transport and

mobilized for tourism services and

others

facilities

 Absence of hygiene codes for health safety  Limitation of supply of utilities such as electricity and water Threats

Opportunities  Booming outbound market of

 Over and un-planned development

neighboring countries

around sites of touristic interest

 Niche in adventure tourism, eco-

degrading attractions

tourism, community-based tourism

 Competition from emerging regional

 Strengthening inter-sectoral linkages

destinations (Bhutan, Myanmar, Tibet,

 Emergence of new segments such as

India)

Meeting Incentive Convention Event (MICE), education, health wellness, meditation and others  Gradual opening up of new touristic sites for expedition and trekking  Stability in the country with enhanced safety and security  Establishment of Bhairahawa airport as international airport provides additional air connectivity

27

9. Implementation Mechanisms for NTIS 2016 To facilitate the process of reviewing and updating NTIS2010, MoC constituted a Steering Committee under the leadership of the Secretary of the Ministry. The Steering Committee included representatives from line ministries and agencies, the private sector, Development Partners, and experts. A Technical Committee, led by a t Secretary of MoC, was formed to facilitate the day-to-day process and to the team of experts recruited by MoC. In addition, six Thematic Working Groups led by t Secretaries from relevant line ministries were constituted to contribute to the analyses of different sectors and cross-cutting issues. Finally, a large number of consultations were held at central and local levels involving line ministries, private sector, Development Partners, civil society and media. Going forward, the Government of Nepal is committed to building on the mechanisms in place to implement NTIS 2010 and those set up to assist with the formulation of NTIS 2016 to ensure strong national ownership and robust commitment for effective implementation. The Government of Nepal is committed to allocating adequate resources and taking up required policy reforms to implement the recommended actions and activities proposed in NTIS 2016. An EIF National Steering Committee has been constituted under the chairmanship of the Minister for Commerce of the Government of Nepal with a view to ensure effective coordination for implementation of the Strategy through policy and strategic guidance and resource mobilization. The composition of the EIF National Steering Committee is as follows:

EIF National Steering Committee: Minister, Ministry of Commerce, Government of Nepal Chief Secretary, Government of Nepal Secretary, Ministry of Finance Secretary, Ministry of Industry Secretary, Ministry of Law, Justice and Parliamentary Affairs Secretary, Ministry of Agricultural Development Secretary, Ministry of Foreign Affairs Secretary, Ministry of Commerce Secretary, Secretariat of the National Planning Commission Deputy Governor, Nepal Rastra Bank President, Federation of Nepalese Chambers of Commerce and Industries President, Confederation of Nepalese Industries President, Nepal Chamber of Commerce t Secretary, Planning & International Trade Cooperation Division, MoC

Chairperson Vice-Chairperson Member Member Member Member Member Member Member Member Member Member Member Member Secretary

The EIF National Steering Committee (EIFNSC) meets a minimum of twice annually, normally in February and August, in order to review progress and provide necessary 28

guidance. Going forward, it will assess annually the performance of each Thematic Committee and Product Specific Focal Point assigned for implementing NTIS. of Reference (ToR) and composition of the Thematic Committees are the prerogatives of the EIF NSC. Six Thematic Committees, as presented in Table 10, will be responsible for facilitating implementation of recommended Actions under their responsibilities through the lead agencies in collaboration with other agencies and stakeholders: Table 10: Six Thematic Committees Thematic Committees Thematic Committee-1 Thematic Committee-2 Thematic Committee-3 Thematic Committee-4 Thematic Committee-5 Thematic Committee-6

Thematic Areas

Lead Agencies

Coordinators

MoC

t Secretary, Planning and International Trade Cooperation Division, MoC

MoC

t Secretary, Export Promotion, Trade and Transit Division, MoC

MoAD

t Secretary, AgriBusiness Promotion and Statistics Division, MoAD

MoI

t Secretary, Industrial Promotion Division, MoI

Custom and Trade Facilitation

MoF

t Secretary, Revenue Division, MoF

Policy and legislative reforms

OPMCM

t Secretary, OPMCM

Aid for Trade and Trade in Services Trade negotiation capacity building, trade infrastructure development, and trade institutions Agricultural products development, and SPS measures Craft and manufacturing products development, Investment facilitation, TBT, and IPRs

The line ministries and agencies, as specified in the Action Matrix, will be responsible for implementing respective activities. In addition, concerned private sector entities are entrusted to carry out assigned activities to facilitate the implementation of the Strategy. The review of NTIS 2010 suggests limited results in implementing product specific actions as compared to cross cutting activities, due to the absence of a clear allocation of responsibilities to individual agencies for product specific activities, insufficient coordination, and lack of resources among others. As a result, Focal Points have been designated and assigned with specific roles and responsibilities to ensure higher level of progress in product specific activities (Table 11).The Focal Points will coordinate with other agencies concerned (government, private sector and Development Partners) while implementing respective action recommendations of the Strategy.

29

Table 11: Focal Points for Priority Export Potential Goods and Services Focal Point Priority Export Potential Sectors Director, Vegetable Development Directorate, DoA, Cardamom in coordination with Program Director, National Spices Crops Development Program Director, Vegetable Development Directorate, DoA, Agro-based Ginger in coordination with Program Director, National products Spices Crops Development Program Tea Executive Director, NTCDB Medicinal and Director General, DPR (in collaboration with Aromatic Plants Department of Agriculture) t Secretary, Industrial Promotion Division, MoI All Fabrics, Textile, (in coordination with DoSCI, DOI, and other Yarn and Rope agencies) t Secretary, Industrial Promotion Division, MoI Leather (in coordination with DoSCI, DOI, DoLS, and other agencies) Craft and t Secretary, Industrial Promotion Division, MoI manufacturing Footwear (in coordination with DoSCI, DOI, and other products agencies) t Secretary, Industrial Promotion Division, MoI Pashmina (in coordination with DoSCI, DOI, DoLS, and other agencies) t Secretary, Industrial Promotion Division, MoI Carpets (in coordination with DoSCI, DOI, and other agencies) Skilled & Semit Secretary, Foreign Employment & Skilled Professionals International labor Relation Division, MoLE at various categories IT &BPO and IT Director General, Department of Information Services Engineering Technology Tourism (including leisure, business, Director General, Department of Tourism education, &medical) The Ministry of Commerce will coordinate and monitor the entire implementation of NTIS 2016.Thematic Committees will submit progress reports to the Ministry of Commerce in January and July. The progress reports will be discussed at a meeting chaired by the Secretary of MoC prior to the corresponding meeting of EIF NSC. The meeting will provide guidance and direction to the Thematic Committees for effective implementation of the Strategy, and refer and recommend to the Steering Committee on matters requiring higher level interventions. Recognizing the role of National Implementation Unit (NIU) in facilitating and coordinating the implementation of the Strategy, the NIU will be strengthened further through capacity building and other required istrative adjustment. The NIU will 30

coordinate the mobilization of Aid for Trade (AfT) and capacity enhancement of the WTO Focal Points in line Ministries and private entities. The Action Matrix identifies 191 short and medium-term Actions to be completed between 2016 and 2020. To ensure effective implementation of the entire Action Matrix, both domestic and international resources need to be mobilized. A donor group on AfT will harmonize the of Development Partners to achieve the Outcomes of NTIS 2016. The Donor Facilitator is expected to play a key role in leveraging resources to implement the Strategy. In addition, the Government of Nepal will adopt a Sector Wide Approach (SWAp) or similar modality for effective implementation of the Strategy through coordination and mobilization of domestic resources and Aid for Trade.

10.

Monitoring and Evaluation

The Ministry of Commerce will monitor the implementation of NTIS 2016 and share findings with the EIF National Steering Committee every August. Inputs and outputs will be monitored against the indicators and targets of the Strategy reflected under the Action Matrix. An independent mid-term review and evaluation will be carried out by MoC in coordination with agencies concerned and the EIF. The Government of Nepal will update the Strategy in five years.

31

11.

NTIS 2016 Action Matrix

Development Impacts, Outcomes, Actions

Key Performance Indicators Responsible Agencies Target by 2017 (Short-term) and by 2020 (Medium-term) Development Goal: Increase the contribution of export potential goods and services to the national economy through improved trade enabling environment and strengthened value chain development of priority potential products Indicator 1 FDI in Nepal was $1.1 billion in 2014 FDI in trade and industry sector increased MoI, MoF, MoC by 15% per annum Indicator 2 38 out of 253 Actions identified in NTIS At least 80 % of NTIS 2015 Action GoN, Private 2010 implemented in 2014 recommendations implemented sector Indicator 3 Logistic Performance Index (Score):2.59 Logistic Performance Index (Score): 3 GoN, Private sector Indicator 4 Share of export of NTIS 2015 products (9 Share of export of NTIS 2015 products (9 MoC, MoI, Line goods) in GDP was 1.93% in 2012/13 goods) in GDP reached to 4% in 2020 ministries, Private sector Cross-Cutting Issues Development Impacts, Key Performance Indicators Responsible Outcomes, Actions Agencies 2014 Baseline Target by 2017 (Short-term) and by 2020 (Medium-term) Outcome 1: Trade GoN implements trade capacity building  Institutional mechanisms to implement MoC and Line Capacity including programs, including trade negotiation NTIS 2015 are highly effective ministries Trade Negotiation capacity development with from  Trade negotiation capacity at A strong capacity development partners. But capacity of multilateral, regional and bilateral levels ive of trade institutional mechanisms to implement further enhanced development including in NTIS remains limited. Trade negotiations areas of trade negotiation capacity also remains limited. in place Short Term Actions: 2016-2017 Action 1: A draft capacity development strategy for A comprehensive capacity development MoC Conduct capacity enhancing capacity of NIU & MoC has needs assessment developed and approved development need been prepared with from GIZ but 2014 Baseline

32

Development Impacts, Outcomes, Actions assessment of National Implementation Unit, MoC, Thematic Committees, Concerned agencies and Private sector involved in export trade Action 2: Conduct trade negotiation trainings incountry with special focus on multilateral, regional and bilateral trade Action 3: Send MoC officials to participate in advanced level trade negotiation training programs abroad focusing on bilateral trade Action 4: Send MoC officials to participate in advanced level trade negotiation programs abroad focusing on regional and multilateral trade from Nepalese perspective (also from LDCs and LLDCs perspective) Action 5: Assign roles and responsibilities to all

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

Responsible Agencies

not yet officially approved

Few trainings on trade negotiation have been conducted, however, such trainings at wider level not yet conducted

At least two trainings in-country on each level of trade negotiation (multilateral, regional, bilateral) conducted

MoC

Few officials trained on bilateral negotiations abroad

MoC officials participate in at least two training programs on bilateral negotiations abroad

MoC

Few officials trained on regional and multilateral negotiations abroad

MoC officials participate in at least three training programs on regional and multilateral negotiations abroad

MoC

of References for EIF Technical Committees have been assigned by EIF National Steering Committees.

Clear role, responsibility, and ToRs of Thematic Committees, Product Specific Focal Points and WTO Focal Points

EIF National Steering Committee

33

Development Impacts, Outcomes, Actions

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) assigned

concerned institutions and committees Action 6: Monitoring of the implementation of the of Conduct periodic the NTIS 2010 conducted but not monitoring of the institutionalized well implementation of the Strategy Medium Term Actions: 2018-2020 Action 1: A draft capacity development strategy for Implement enhancing capacity of NIU & MoC has recommendations of the been prepared with from GIZ but capacity development not yet officially approved strategy Action 2: A draft implementation modality of Trade Develop and introduce SWAp has been drafted but not yet Sector Wide Approach in finalized Trade Sector Development (Trade SWAp) or similar modality for effective resource mobilization Action 3: Few strategy papers developed in the past Prepare trade negotiation but such practice not yet institutionalized strategy paper at multilateral, regional and bilateral levels and institutionalize such practices Action 4: Trade not yet incorporated in role and Incorporate trade, responsibilities of concerned Ministries & especially export related Agencies matters in the role and

Responsible Agencies

Yearly monitoring of the implementation of the Strategy conducted and adjusted as per the instruction of the EIFNSC

MoC

Comprehensive capacity development strategy implemented

MoC, Line Ministries, Private sector

Effective Trade SWAp implementation modality or similar modality finalized and being implemented

MoC

Trade negotiation strategy paper prepared before negotiations and such practices institutionalized

MoC

Trade, especially export trade related matters incorporated in role and responsibilities of concerned Ministries & Agencies

MoC, OPMCM, Concerned Ministries & Agencies

34

Development Impacts, Outcomes, Actions responsibility of concerned Ministries & Agencies Action 5: Mainstream trade in national and sectoral plans, policies, programs and activities Action 6: Enhance inter-agency coordination for export sector development Action 7: Maximize benefit from the WTO Service Waiver Provision Outcome 2: Trade and Investment Environment ive policy and business environment for trade and investment in place

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

Responsible Agencies

Trade agenda has been incorporated in periodic national development plan but not effectively mainstreamed in sectoral plans, policies, programs and activities

Trade agenda in national and sectoral plans, policies, programs and activities fully mainstreamed

OMPCM, MoC, NPC, Line Ministries

Inter-agency coordination has been improved to some extent but requires further improvement

Inter-agency coordination for export trade development further enhanced

OPMCM, MoC, Line Ministries

Some initiations have been taken to benefit from the provision

Nepal's priority export potentials of services being benefited from the provision

MoC

   

New Trade Policy 2015 introduced A draftexport-import management act prepared NTIS update initiated

Foreign Direct Investment (FDI) Policy 2015 adopted  A new Foreign Investment and Technology Transfer Act (FITTA) is being drafted  Legal and regulatory reforms initiated Short Term Actions: 2016-2017 Action 1: 25 % of the 101 trade-related legal and Complete all trade regulatory reforms identified in NTIS 2010 related (goods and have been completed services) legal and

    

Trade policy 2015 implemented effectively Export-import management act and rules in place Updated NTIS implemented FDI policy 2015 implemented effectively Legal and regulatory reforms completed

At least 40% of trade-related legal and regulatory reforms identified in NTIS 2016 completed

35

MoC, Line Ministries and Private sector

MoF, MoI, MoC

OPMCM, MoC, Line ministries

Development Impacts, Outcomes, Actions

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

regulatory reforms Medium Term Actions: 2018-2020 Action 1: 25 % percent of the 101 trade-related legal Complete all legal and and regulatory reforms identified in NTIS regulatory reforms 2010 are completed related to trade (goods and services) Outcome 3: Trade and Cost of customs clearance for imports in Transport Facilitation Nepal in 2013 is twice as high as the Nepal's export median cost for Bangladesh-India-Sri competitiveness Lanka. increased through Inland transportation and handling is 18 improved trade and days for exports and 14 days for imports transport facilitation for a 20 foot container Short Term Actions: 2016-2017 Lack of integrated intermodal transport Action 1: system Improve domestic transportation system Action 2: Upgrade infrastructure at airports

Action 3: Make the transport sector competitive by eliminating cartel and syndicate in transport sector

 TIA is in the process of being upgraded. No plans to upgrade other domestic airports  Two regional airports and an international airport in Nijgadh are underway Syndicate exists in practice in the trucking sector and the sector is non-competitive

Responsible Agencies

At least 80% of trade-related legal and regulatory reforms identified in NTIS 2016 completed

OPMCM, MoC, Line ministries

Cost of customs clearance reduced to median cost for Bangladesh, India, and Sri Lanka.

DoC, MoC

Number of days required for Inland transportation and handling for exports and imports reduced by 25% by 2020

DoC, MoPIT



DoR, CAAN, MoPIT, MoCTCA



An integrated intermodal transport plan in place Multimodal Transport Act and Regulation effectively implemented

Plan for improving domestic airport facilities adopted and implemented

MoCTCA, CAAN, MoF

Competitive trucking and transportation sector through effective enforcement of legal and regulatory provisions

MoPIT, MoC

36

Development Impacts, Outcomes, Actions Action 4: Improve road conditions and networks Action 5: Expand road network using PPP model Action 6: Simplify customs procedures in line with Revised Kyoto Convention (RKC) Action 7: Make required interventions to meet WTO TFA obligations Action 8: Develop an effective AEO system Action 9: Train customs brokers to make able to use key features of recent reforms in customs procedures Action 10: Publish average release time for all key border crossings Action 11: Make updated data base available to customs

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)  Limited road connectivity and poor Effective road network linking production maintenance areas of priority export potential sector and  Programs to extend road networks up to regular maintenance ensured rural areas are underway The Kathmandu-Kulekhani-Hetauda tunnel Road connectivity being developed in PPP has been initiated in PPP model. model 2014 Baseline

Responsible Agencies MoPIT, MoC, MoF

MoPIT, MoFALD, MoC, MoF

 Customs procedures reformed as outlined by RKC  Customs using ASYCUDA World Single Window System for Customs procedures implemented Customs reforms and modernization actions are identified and implemented in compliance with the three Categories (A,B, C) in WTO TFA An effective AEO system established

MoC, DoC, CAAN

Customs brokers are not equipped to use and understand many of the new customs procedures

Customs brokers trained to use the new customs procedures

DoC

DoC does not have a system to establish and publish average release time for all key borders crossings

Average release time for all key border posts system established and published

DoC

Insufficient data base on Customs valuation.

Updated database available on Customs valuation

DoC

Major Customs are implementing advanced customs clearance procedures including ASYCUDA++

DoC’s CRMSAP not yet aligned with WTO TFA

There is no AEO system in place as of 2014

37

DoC

DoC

Development Impacts, Outcomes, Actions

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

officers on customs valuation and importers on DoC’s website Action 12: PCA offices are in place but capacity of Ensure fully functioning staff is weak. PCA offices Action 13: ICD, Birgunj is not price competitive and Make ICD, Birgunj fully needs to be ed with the World operational Maritime Organization (WMO) Action 14: Access of Nepalese traders to competitive Ensure required sea ports in India is very limited infrastructure and operational modalities to utilize additional ports of India, Bangladesh & China Action 15: Electronic data interchange system at port Introduce electronic data customs and land border customs not in interchange system at place port customs and land border customs Action 16: A draft of Export-Import Management Act Finalize the Exporthas been prepared Import Management Act (draft) and get approval from the Parliament Medium Term Actions: 2018-2020 Action 1: Nepal has no railway network and railway Initiate measures for policy by 2014 developing an effective railway network in Nepal Action 2: ASYCUDA installation remains partially Implement full-fledge completed in of modules and limited

Responsible Agencies

Functional PCA offices in place

DoC

Fully operational ICD, Birgunj in place along with its registration with the WMO.

MoC, DoC, NITDB

Additional ports utilized and export volume increased

MoC, MoPIT, NITDB

Electronic data interchange system at port customs and land border customs introduced

DoC

Export-Import Management Act enacted

MoC

Railway policy under implementation and construction program initiated

MoPIT, Dept. of Railways

A full-fledged web based ASYCUDA in all major Customs points fully implemented

DoC

38

Development Impacts, Outcomes, Actions ASYCUDA across all major Customs points

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) to key border posts. The web access has yet to be installed. Duplicate manual procedures continue in parallel to ASYCUDA procedures There are some initiations of a national A fully developed NSW system implemented single window 2014 Baseline

Action 3: Develop functional National Single Window (NSW) system Action 4: There is no clear plan to invest in much Strengthen infrastructure needed infrastructure in customs points at Customs points Action 5: No concrete Transit Agreements in the Negotiate for South Asian region Regional Transit Agreement to lower transit cost in the region Outcome 4: Standards Seven producers (potential exporters) and Technical have received ISO 9001 certifications Regulations Increased competitiveness of Nepali exporters through strengthened lab and testing facilities Short Term Actions: 2016-2017 Action 1: Cabinet approved initial draft; MoI yet to Amend Nepal Standards complete revisions and receive comments Act and Regulations from WTO Action 2: Cabinet approved initial draft; NBSM yet to Make Nepal Accreditation complete revisions Act and Regulations Action 3: Enforcement of WTO-TBT Agreement

Responsible Agencies

DoC, MoI, MoAD, MoC, NITDB

Clear investment plan for infrastructure development in customs points in place and being implemented Regional Transit Agreements negotiated

DoC, MoI, MoAD, MoF

200 potential exporters received ISO 9000, ISO 14000, SA 8000, OHS 18000 or ISO 17000

MoI, NBSM, Private labs

Nepal Standards Act and Regulation amended

MoI, MoC, NBSM

Nepal Accreditation Act enacted

MoI, MoC, NBSM

Code of Good Practice adopted and work

Nepal Council on

39

MoC, DoC

Development Impacts, Outcomes, Actions Enforce WTO-TBT Agreement Code of Good Practice and notify ISO NET Action 4: Strengthen WTO-TBT Enquiry Point Action 5: Sensitize exporters about product and process standards Action 6: Accelerate the process of securing international accreditation for private and public labs, including NBSM and DFTQC, for product and test certification

Action 7: Ensure International accreditation of several private and public certifiers for ISO 9000, ISO 14000, SA 8000 and OHS 18000

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) Code of Good Practice not yet initiated plan notified to ISO NET regularly at six month intervals as required 2014 Baseline

WTO-TBT Enquiry Point established but weak in capacity; limited coordination with MoC on notifications NBSM and DFTQC hold periodical workshops for producers but are not sufficient 

NBSM chemical laboratory for 61 parameters of 9 products and mass calibration laboratory for 23 parameters are internationally accredited by NABL India  DFTQC chemical labs internationally accredited for 27 parameters by NABL, India  Two private labs internationally accredited for some medicine, food items, and water  12 labs accredited by NEPLAS but NEPLAS is not internationally accredited. NBSM accredited by NABCB, India for ISO 9001 only

Responsible Agencies Standards (NCS), MoI, MoC, NBSM

Interactive WTO-TBT Enquiry Point website in place, at least five awareness programs for Nepali exporters organized Private sector sensitized about product and process standards

NBSM

 NBSM’s scope of accreditation expanded to include volume, temperature, force, pressure calibration, mechanical, textile, electrical, and additional chemical parameters  DFTQC’s scope of accreditation expanded to include MRL and microbiology  Another 3 private labs internationally accredited for some products and test parameters

NBSM, DFTQC, Private sector

 NBSM accredited for ISO 14000 SA 8000 and OHS 18000  Five private certifiers accredited for at least one of the four international standards

NBSM, Private sector

40

NBSM, DFTQC with product associations

Development Impacts, Outcomes, Actions

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)  DFTQC currently cannot provide system 5 public and private certifiers for HAC certification under Food Act and ISO 22000accredited  NBSM provided HAC certification and ISO 22000certification is in process 2014 Baseline

Action 8: Ensure International accreditation of several private and public certifiers for HAC and ISO 22000 Action 9: No national policy and strategy for quality Prepare and implement infrastructure development Quality Infrastructure Development Strategy Action 10: NBSM conducts training programmes on Establish national training quality in annual basis only for awareness center on Quality creation Infrastructure Medium Term Actions: 2018-2020 Action 1: Nepal Accreditation Board not yet Establish Nepal established Accreditation Board with adequate staffs

Action 2: Establish additional specialized product laboratories on a PPP basis and ensure accreditation of labs Action 3: Formulate additional standards and technical regulations for non-food export products

Specialized labs for handicraft and textile established on PPP basis; no lab internationally accredited

25 standards for export products yet to be fully harmonized with ISO/IEC/Codex

Responsible Agencies NBSM, DFTQC, Private sector

National policy and strategy for quality infrastructure development prepared and being implemented

MoI, MoAD, NBSM, DFTQC

A well functional National Training Center established

NBSM, DFTQC

Nepal Accreditation Board fully established and staffed; capacity development plan in place; affiliation to international accreditation bodies established; accreditation process in Nepal started, mutual recognition agreement concluded Three new specialized labs established on a PPP basis and accredited internationally

MoI, MoAD

35 standards for non-food export products formulated and harmonized with ISO/IEC/Codex

NBSM

41

NBSM, DFTQC

Development Impacts, Outcomes, Actions

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

harmonized with ISO/IEC/Codex Action 4: 115 technical regulations for food products Harmonize technical exist, only few are harmonized with Codex regulations for food products with Codex Action 5: Nepal Accreditation Board (NAB) does not Develop and maintain exist; no such inventory available inventory of products/system certifiers operating in Nepal Outcome 5: As of early 2015, 20 manufacturing Sanitary and Phytoestablishments have received HAC or sanitary Standards ISO 22000 certification The competitiveness of As of early 2015, traceability scheme Nepali exporters of agro- available only in the milk sector in a limited based products way increased through enhanced capacity to meet international standards Short Term Actions: 2016-2017 Action 1: Food Act 1966, Animal Health and Improve SPS related Livestock Act 1991,Veterinary Council Act legal framework 2000,Pesticide Act 1991 and Pesticide Rules 1994 still not amended Action 2: Strengthen surveillance capacity of MoAD at field level Action 3:

Surveillance capacity of MoAD at field level is weak, including in mishandling of chemicals and pesticides on crops and use of veterinary medicine There is very limited capacity in DFTQC

Responsible Agencies

Two-third of the technical regulations for food products harmonized with Codex

DFTQC

Inventory developed and transferred to Nepal Accreditation Board once established

NBSM followed by NAB

At least 30 exporters received HAC or ISO 22000 certification

DFTQC, NBSM, Private sector

Traceability schemes in five agro-based export sectors implemented

MoAD, DFTQC, Commodity Associations

Food Act 1966, Animal Health and Livestock Act 1991,Veterinary Council Act 2000, Pesticide Act 1991 and Pesticide Rules 1994 amended

MoAD, OPMCM

Registration and Licensing system for suppliers and sellers of chemicals, pesticides, veterinary medicines at district level established Inspection and enforcement capacity for

MoAD, DoA, DoLS

42

MoF, MoGA,

Development Impacts, Outcomes, Actions

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) and at regional level to implement and food hygiene and safety at central and enforce food hygiene and safety in food regional levels in food processing and processing and catering establishments catering establishments (including hotels (including hotels and restaurants); and restaurants) enhanced insufficient trained staff and lacks of clear regulations There is no robust framework to implement A robust framework for the implementation traceability schemes in value chain of agro- of traceability schemes in value chain of based products agro-based products in place 2014 Baseline

Enhance inspection and enforcement capacity for food hygiene and safety at central and regional levels in food processing and catering Action 4: Establish a framework to implement traceability schemes in value chain of agro-based products Action 5: There is no lab in Nepal that is Establish internationally internationally accredited for MRLs and accredited labs in Nepal other key food safety parameters. for MRLs Action 6: The National SPS Coordination Committee Make the National SPS is practically not functional as expected Coordination Committee functional Medium Term Actions: 2018-2020 Action 1:  High turnover of trained SPS staffs in Strengthen labs and regional centers and customs points quarantine facilities at  Basic testing equipment often lacking in regional centers and regional centers and customs points customs points Action 2: SPS training and awareness raising is Establish a Training mostly ed by donor programs and Institute for SPS MoAD has limited resources at disposal

Outcome 6: Intellectual Property Rights

Use of GIs for Nepalese products not yet implemented

Responsible Agencies DFTQC

MoAD, DFTQC

DFTQC Chemical Lab internationally accredited for MRLs

DFTQC

Functional National SPS Coordination Committee

MoAD, MoC, MoI,

Labs and quarantine facilities at regional centers and customs points strengthened with trained SPS human resources and adequate equipment

MoAD, DFTQC, DoA, DoLS

An SPS Training Institute established with a dual mandate to train SPS professionals and assist in awareness raising about food hygiene and safety in the private sector (preferably, using PPP model) GIs of relevant NTIS 2016 products ed in Nepal and abroad

MoAD, DFTQC, Private sector

43

MoI, MoAD, MoFSC, IPR

Development Impacts, Outcomes, Actions Increased number of Nepalese producers using IPR protections as a competitiveness factor

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

There are no Utility Model registration by Nepalese producers and innovators

Utility Models ed by Nepalese producers and innovators

There were only 17 designs ed by Nepalese producers and designers in 2011

A minimum of 35 designs ed by Nepalese producers and designers

Short Term Actions: 2016-2017 Action 1:  PDTA 1965 last amended in 2006 Amend PDTA by  A new IPR policy is being drafted incorporating Utility Models, GIs and other IPRs related provisions Action 2: Draft for a Plant Variety Protection and Protect farmers’ Farmers’ Rights Act (PVPFRA) prepared in rights(plant variety) 2004

Responsible Agencies authority/office , Private sectors MoI, MoAD, MoFSC, IPR authority/office , Private sectors MoI, MoAD, IPR authority/office , Private sectors

PDTA amended or a new Industrial Property Act adopted by including Utility Models, GIs, and other IPRs

OPMCM, MoI, MoC

PVPFRA enacted

OPMCM, MoAD, MoFSC

Action 3: Protect farmers’ rights (seeds)

The Seeds Act/Rules do not qualify farmers’ rights in the local seed varieties

The Seeds Act/Rules amended and adopted to allow certification of seeds produced by farmers and farmers rights to sale and benefit from the sale of local varieties

MoAD

Action 4: Protect access and benefit sharing rights Action 5: Establish mechanism to protect the rights of local communities Action 6:

Draft for an Access to Genetic Resources and Benefit Sharing Act (ABS Act) prepared in 2002 There is no adequate mechanism for preand post-grant challenges of IPRs

Access to Genetic Resources and Benefit Sharing Act enacted

OPMCM, MoFSC

Mechanism in place

IPR Office and NCOR

There is no proper forum in Nepal to settle

A Dispute Settlement Mechanism for IPR

MoI

44

Development Impacts, Outcomes, Actions

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) established

Establish a Dispute IPR disputes Settlement Mechanisms for IPR Medium Term Actions: 2018-2020 Action 1: Two offices are responsible for Ensure adequate human implementing IPRs; there is not sufficient and institutional coordination and staffs are also not wellresources to implement trained on IPR IPRs Action 2: There are no incentives to encourage Provide incentive Nepalese producers, innovators, and package to encourage creators to protect IPR Nepalese firms, innovators, and creators for protecting IPR Outcome 7: Trade in Services related crosscutting matters Competitiveness of Nepalese service sector increased Action 1: Strengthen Trade in Services inquiry point

Action 2: Maintain and update efficient data system of

Responsible Agencies

An integrated IPR office/authority well equipped with trained human resource and adequate equipment in place

OPMCM, MoI, MoC

Incentive packages such as tax holidays, other fiscal measure to encourage Nepalese producers, innovators, and creators in place

MoF, MoI, IP office

Service export of Nepal in year 2012-13 was USD 1.08 billion and the inflow of remittance was USD 4.94 billion in the same year

Nepal's service export and inflow of remittance grown on an average of 20% annually

MoC, Line Ministries and Private sector

 WTO Commitment Fulfillment Section of MoC is assigned as Service Inquiry Point  The Inquiry Point has not been able to collect, provide and disseminate required service trade related information effectively and efficiently  Currently, the service trade data is fully acquired through balance-of-trade data of Nepal Rastra Bank

Fully functional Service Inquiry Point in place

MoC

Separate service trade data management system in operation

TEPC

45

Development Impacts, Outcomes, Actions trade in services

Action 3: Mainstream trade in services in the policies, programs and activities of Ministries concerned Action 4: Improve payment mechanism for export of services Action 5: Initiate negotiations at various bilateral and multilateral forums to include the movement of 'skilled and semi-skilled professionals at various categories' under mode 4 Action 6: Assess and explore market potentials and promote Nepalese service sectors through diplomatic missions abroad Outcome 8: Large Cardamom Volume and value of

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)  There is a lack of service trade data system 2014 Baseline

Responsible Agencies

 Currently trade in services has not received much attention in national development process  Ministries and other agencies related to service trade have not prioritized trade in their policies and programmes The current payment of service export and inflow of remittance are not fully received through formal channels

Trade in services fully mainstreamed in national development process and prioritized by the concerned Ministries and agencies

MoC, MoF, NPC, NRB and other line Ministries

About 90% of payment of service export and inflow of remittance received through formal channels

MoC, NRB

Semi-skilled human resources are not included under mode 4

Semi-skilled human resources included under mode 4

MoC, MoFA

Service trade promotion has not been a priority of diplomatic missions abroad

Priority service sectors promoted through diplomatic missions abroad

MoFA, MoC

Priority Export Sectors 5,750MT of large cardamom were 6,500 MT of large cardamom produced produced in 2012/13

46

MoAD, DoA, NSCDP, CDC, NARC, farmers

Development Impacts, Outcomes, Actions export of large cardamom increased

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) Price (US$/MT) of Nepalese export is 50% Price (US$/MT)of Nepalese export of that of Indian exports due to low value increased to 75% of that of Indian exports addition 2014 Baseline

Short Term Actions: 2016-2017 Action 1: Cardamom Promotion Strategy 2015-2019 Adopt a clear road map is yet to be adopted for cardamom development Action 2: There is no internationally accredited Establish international laboratory to test and certify exports from accredited laboratory the sector testing system to the sector Action 3: There is a lack of modern irrigation system Improve irrigation system Action 4: The sector lacks traceability systems Implement traceability increasingly demanded in international system market Action 5: The sector lacks collective trademark and Improve branding in the representative sales offices in key markets sector Action 6: There are limited number of cooperatives Increase the number of in the sector cooperatives to scale up and improve farming techniques Medium Term Actions: 2018-2020 Action 1: DoA/NSCDP lacks skilled technicians to Conduct extensive skill train large numbers of farmers in the use of development training to appropriate farming techniques, disease the farmers mitigation, semi processing,

Responsible Agencies MoAD, MoC, MoF, CDC, NARC, Cooperatives, Private Sector

Cardamom Promotion Strategy 2015-2019 adopted and being implemented

MoAD, MoC,

Internationally accredited labs to test and certify exports established

DFTQC,DoA, private sector

1000 ha of land cultivating large cardamom equipped with adequate irrigation system Traceability systems formulated and being implemented

DoIr, DoA

A collective trademark adopted and ed in target destinations, and sales offices established in those destinations. Multi-functional and increased number of cooperatives

MoC, MoI, TEPC, MoAD, NSCDP

At least 25,000 farmers trained

DoA, CATC, NSCDP, CDC

47

MoAD, DoA, NSCDP, DFTQC

MoAD, CDC, private sector

Development Impacts, Outcomes, Actions Action 2: Ensure better seedlings to farmers to increase production and productivity Action 3: Establish modern processing and storage facilities for value addition in the sector Outcome 9: Ginger Volume and value of exports of ginger increased

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) 64 nurseries are in operation  At least 100 nurseries in operation. NARC lacks a research program on  NARC involved actively in research disease resistant seedling. program on disease resistant seedlings. 2014 Baseline

 

DoA, NARC, , NSCDP, CDC, Private sector

There are very few modern facilities for value addition

At least 100 new collection centers and processing centers, and one modern processing and storage facility being operated

MoAD, MoF, DoA, NSCDP, CDC, Private sector

235,000 MT of ginger were produced in 2013, 65% was exported The export price of US$ 217/MT price for Nepali ginger is 20% that of China and 60% that of India.

At least 300,000MT of ginger produced and 70% of it exported Price (US$/MT) of Nepalese export increased to 75% that of unit price of Chinese ginger exports due to increased value addition in Nepal

MoAD, NARC, NGPTA MoAD, Private Sector, MoF

Unified plan/strategy for the ginger sector development adopted and being implemented

MoAD, NSCDP

Short Term Actions: 2016-2017 Action 1:  MoAD has drafted a Nepal Ginger Adopt a clear road map Promotion Strategy 2015-2019 for ginger sector  The National Spice Crop development Development Program has developed a Five Year Strategic Plan Action 2:  There are some Nepali standards for Enhance capacity of ginger focusing mostly on Nepali producers and compositional parameters exporters to meet  Nepal does not have an internationally international SPS accredited laboratory for testing and standards certifying parameters such as MRLs, moisture content Action 3:

Responsible Agencies

Surveillance capacity of MoAD at field



A full set of internationally harmonized standards (consistent with Codex) including focusing on MRLs, moisture, etc. adopted  Internationally accredited labs to cover the full range of testing parameters requested by importing countries in place Registration and licensing system for

48

DFTQC, NBSM, Private sector

MoAD, DoA

Development Impacts, Outcomes, Actions

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) level is weak, including in mishandling of suppliers and sellers of chemicals and chemicals and pesticides on crops pesticides at district level established 2014 Baseline

Strengthen surveillance capacity of MoAD at field level Action4: Nepal lacks a market study for the purpose Introduce a strategy to of export product and destination diversify products and diversification export destinations Medium Term Actions: 2018-2020 Action 1: DADOs extension services for ginger are Conduct extensive limited training to farmers Action 2: NARC lacks a research program on Provide better seeds to disease resistant seeds/varieties farmers Action 3:  There are no formal collection centers Establish collection and fumigation facilities centers, and  There is no processing center except warehousing and one modern washing facility which is processing facilities under construction Outcome 10: Tea Export of Tea significantly increased

Export of Orthodox tea was approximately $2.7 million in 2013 3,000 MT of Orthodox tea was produced in 2013 Short Term Actions: 2016-2017 Action 1: There is no Auction market in Nepal Attract foreign buyers through direct auctions in Nepal Action 2: There are no Tea Houses (promotion Promote tea for foreign centers) in Nepal buyers in Nepal

Responsible Agencies

Product and market diversification strategy being implemented

MoC, MoAD, TEPC

DADOs extension services for ginger expanded and extensive training programs to farmers conducted Active research program on disease resistant seeds being conducted by NARC

MoAD, DoA, DADO, NGPTA

 At least 100 modern collection centers established  At least three fumigation chambers established along three border points  At least three additional modern washing and processing facilities built Export of Orthodox Tea reached to about $6 million At least 4,500 MT of Orthodox tea produced

MoAD, MoC, MoF, NGPTA, Private sector

An Auction house/market operated

NTCDB

At least two Tea Houses established (in Ilam and Kathmandu)

NTCDB, CFTC

49

NARC

NTCDB, MoAD, MOC, producers NTCDB, MoAD, MOC, producers

Development Impacts, Outcomes, Actions Action 3: Promote Nepalese tea overseas

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)  Collective Trademark is in the final  A Collective Trademark for Orthodox Tea stage of registration in Nepal and established and ed overseas abroad  A GI for Orthodox Tea established and  There is no GI for Nepalese Tea ed overseas Surveillance capacity of MoAD at field Registration and Licensing system for level is weak, including use of chemicals supply and sale of chemicals, pesticides, and pesticides on crops veterinary medicines effectively implemented 2014 Baseline

Action 5: Strengthen surveillance capacity of MoAD at field level for proper use of chemical and pesticides Action 6: No internationally accredited laboratories Establish internationally for MRLs and other key food safety accredited laboratories in parameters Nepal for MRLs Action 7: There are no Nepali standards for Adopt export standards Orthodox tea to organic cultivation, collection and processing in Nepal Medium Term Actions: 2018-2020 Action 1: 8,800ha plantation for Orthodox tea in Increase acreage for tea 2012/13 plantations and gardens Action 2: 1200 ha of plantation was certified for Increase acreage of organic tea in 2012/13 certified organic tea plantations and gardens Action 3: No GIS mapping for tea potential acreage Record existing and potential acreage for tea cultivation Action 4: There are 50 Tea Producer Cooperatives Increase number of



Responsible Agencies NTCDB, MoC, MoAD, HOTPA, TEPC MoAD

DFTQC Chemical Lab internationally accredited for MRLs  Other labs accredited or on their way to be accredited Export standards for Orthodox tea developed

DFTQC

At least 12,000 ha plantation for Orthodox tea

MoAD, CTDS,NTCDB, private sector MoAD, private sector, NBSM, DFTQC

At least 5,000 ha of plantation certified for organic tea

DFTQC, NBSM,NARC,

GIS mapping for existing and potential tea acreage completed

NTCDB, MoAD, NARC

Number of tea producer cooperatives reached to 100

MoAD, MoPAC, CFTC, NTCDB,

50

Development Impacts, Outcomes, Actions cooperatives for tea processing Action 5: Increase processing capacity Action 6: Conduct research on product development of tea Action 7: Strengthen human resources capacity

Outcome 11: MAPs Exports of MAPs increased through the improvements in value chain development

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

Responsible Agencies HIMCOOP,

 

Private sector is reluctant to invest in processing facilities Inadequate technology for processing

There is no research and development activity in tea sector



 Private sector investment in processing facilities increased through measures  Processing technology enhanced  A tea research center established for product development  A tea research lab established in Fikkal

There is a shortage of trained human resources including tea technicians  Skilled labor for plantations and garden  Junior technicians for providing extension services to small holders Export value of MAPs was US$ 14 million in 2013

 Officials in tea sector trained  At least 125 technicians trained by Mechi Multiple Campus (MMC)  At least 5,000 tea producers trained  At least 200 junior technicians trained by CTEVT to provide extension services Export value of MAPs reached to US$20 million

There are 60 to 70 processing industries using mostly traditional technologies

Processing industries using modern technologies established

Short Term Actions: 2016-2017 Action 1: MoFSC has developed GA for a very Implement GA widely limited number of MAPs Action 2: There is no PRA for MAPs Ensure easy availability of Pest Risk Analyses (PRAs) for major MAPs Action 3:  There is no Access and Benefit

MoAD, MoF, NTCDB, NRB, , ADB MoAD, NTCDB, NARC

MoAD, MMC, CTEVT, NTCDB, private sector

MoFSC, MoAD, DPR, , MAPs Exporters Associations, Private sector MoFSC, MoF, DPR, Private sector

GA developed and being implemented for a varieties of MAPs PRAs easily available for major MAPs

MoFSC/DPR, MoAD, MoFSC, DPR, MoAD,

The ABS Act, PPVFR Act and GI legislation

MoFSC, MoAD,

51

Development Impacts, Outcomes, Actions Ensure a robust legal provisions to protect indigenous rights and IPRs

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) Sharing (ABS) Act in place enacted  There is no Act on Protection of Plant Varieties and Farmers’ Rights (PPVFR)  There is no GI legislation There is no system in place to distribute A system to access and share the benefits income that could be collected as a result arising from the ABS Act in place of the ABS Act 2014 Baseline

Action 4: Ensure benefit to the indigenous population from the ABS Act Action 5: Current policies have not been able to Develop policy encourage and promote investment in environment to processing of MAPs encourage better collection and extensive processing of MAPs Action 6: Current capacity of lab is not sufficient Empower DPR to issue internationally recognized certificates for cultivated MAPs Medium Term Actions: 2018-2020 Action 1: There is no strategy for developing Promote MAPs cultivated MAPs cultivation Action 2: There are no proper storage facilities for Establish proper storage MAPs built at collection and trading areas facilities at collection and trading areas to reduce wastage of MAPs Action 3: There are no proper storage facilities for Establish proper storage MAPs at key customs points facilities at key customs

Responsible Agencies MoI

MoF, MoFSC

Reformed policy environment to encourage investment in domestic processing, including elimination of multiple taxes, limits on days associated with collection permits, restrictions on location of processing industries and others in place Internationally accredited testing facility for MAPs established

MoF, MoFSC, DPR

A plan of action to develop cultivated MAPs being implemented

MoAD, MoFSC, DPR

Proper storage facilities for MAPs built at collection and trading areas (preferably, on a PPP model)

MoFSC, Private sector

Proper storage facilities for MAPs built at key customs points

MoFSC, DoC

52

DPR

Development Impacts, Outcomes, Actions

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

points to reduce wastage of Maps Action 4: There are no testing facilities for MAPs at Establish testing facilities key customs points for MAPs at key customs points Outcome 12: Fabrics, Exports of synthetic yarn, synthetic woven Textile, Yarn and Rope fabrics and jute fabrics and bags were Exports of synthetic yarn, worth approximately $164 million in 2013 synthetic woven fabrics and jute fabrics and bags increased steadily Short Term Actions: 2016-2017 Action 1: Synthetic yarn from Nepal was subject to Negotiate with Turkey to tariffs in Turkey in 2013 eliminate all tariffs for synthetic yarn Action 2: Nepal is unable to bid on public tenders for Negotiate with India to jute bags in India open public tender to Nepalese producers for jute bags Action 3: Nepalese producers lack good market Ensure access to market information on opportunities in growing information in growing import markets for synthetic jute fiber and importing markets for fabrics synthetic jute fiber and fabrics Medium Term Actions: 2018-2020 Action 1: Jute production remains low Develop and implement product development

Responsible Agencies

Testing facilities for MAPs in quarantines at key customs points in operation

DPR

Exports of synthetic yarn, synthetic woven fabrics and jute fabrics and bags grown to approximately $200 million

MoI, MoC, TEPC, Private Sector

All tariffs for synthetic yarn in Turkey eliminated and Nepal benefiting from zero tariff

MoC, MoI

Nepali jute producers allowed to bid on public tenders for jute bags in India

MoC, MoI

An export potential assessment and market intelligence on opportunities in growing import markets for synthetic jute fiber and fabrics developed

TEPC

A product development plan developed and implemented for increasing production of jute

MoAD

53

Development Impacts, Outcomes, Actions plan to increase production of jute Outcome 13: Leather Production of raw hides and exports of processed hides increased rapidly

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

 Nepal at present produces around 1620 million sq. feet of raw hides and of which around 14 million sq. feet is exported  Exported $13 million worth of Bovine and Goat leather in 2013 Short Term Actions: 2016-2017 Action 1: Poor slaughtering practices followed in the Ensure effective slaughter-houses which has been implementation of Animal damaging hides Slaughter-house and Meat Inspection Act 1999 Action 2: Damaged hides have resulted in low yield Provide trainings to and export of raw hides employees in slaughter houses and tannery Action 3: At present, testing facilities under NBSM Ensure enforcement of are not utilized by private sector quality certification by NBSM Action 4: The leather sector lacks separate policy Develop a separate and strategy sector policy and strategy Action 5: Small producers cannot access bank Ensure easy access of financing to invest in equipment tanneries to financing and credit facilities for investing in machinery Action 6: Incentives for investment are not

 Production of raw hides increased to at least 30 million sq. feet and value of exports increased by 20 percent  Export of Bovine and Goat leather increased to US$20 million

Responsible Agencies

MoAD, MoI, TEPC, LIAN, private sector

Hides of animals slaughtered undamaged and intact

MoI, DFTQC

Raw hides, processed production and value addition increased

CTEVT, MoE, DSCI

All exports certified by NBSM

NBSM, DoC, Private Sector

A clear value chain strategy for the sector developed

MoAD, MoI, TEPC, LIAN

A credit program established to investment financing for small producers

MoF, NRB

Incentives to investment in the

MoF, MoI

54

Development Impacts, Outcomes, Actions

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) comparable with those offered by India, sector in place at par with neighbors Bangladesh, Pakistan, Sri Lanka or China 2014 Baseline

Ensure incentives for investment in technology and machinery at par with neighboring competitors Action 7: LIAN capacity to provide business Empower Leather intelligence is weak Industries Association Nepal(LIAN) to provide useful business intelligence to the private sector for both domestic and export markets Medium Term Actions: 2018-2020 Action 1: At present, China and India dominate the Explore new market of market for Nepalese leather the sector Action 2: Nepalese consumers mostly eat meat with Campaign to influence skin consumers to practice skinless meat consumption Action 3: Only 10 percent of raw hides are Incentivize leather processed in Nepal processing industry(prioritizing clean technology) Action 4: Lack of coordination among various stages Develop a leather and of value chains has led to poor quality and footwear sector plan inadequate produce of leather in Nepal Action 5: There is only one modern slaughterhouse Increase domestic supply in operation in Nepal as of 2015

Responsible Agencies

LIAN capacity in the area of business intelligence and marketing enhanced

LIAN, TEPC

Leather being exported to European, Asian and other emerging markets

TEPC, Private Sector

Practice of consuming skin reduced by 25 percent

Private Sector, DoLS

Processing of raw hides increased to at least 25 percent

NRB, MoI, MoF

Harmonization of various value chains will be achieved through the plan

MoI, MoC

At least three modern slaughterhouse in operation

MoAD, DFTQC, DLSS

55

Development Impacts, Outcomes, Actions of raw skins/hides by increasing number and developing capacity of modern slaughterhouse Action 6: Establish a leather research institute to the sector

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

The sector lacks the of a leather research institute

Action 7: Tanneries cause significant environmental Address negative damage environmental impact of tanneries through common infrastructures/ facilities, including waste water treatment Action 8: Laws on FDI and on Technology Transfer Ensure favorable are yet to be enacted business environment to encourage FDI and technology transfer Outcome 14: Footwear Nepal produces around 30 million pairs of Production and export of footwear annually and exported around 7.8 footwear significantly million pairs in 2013; current export increased earnings is estimated at 21 million USD Short Term Actions: 2016-2017 Action 1: At present more than 90 percent of Conduct regular trade Nepalese footwear exports go to India fairs and markets surveys Action 2: Workers are given on-the-job trainings Incorporate footwear which is expensive for the companies

Responsible Agencies

A strong research institute established to technological development and innovation. A pilot production plant embedded in the institute and provides vocational training to improve production and quality One or more industrial parks established to cluster leather industries with core facilities including common infrastructure for waste water treatment

MoI, MoC

Proper legal provision on FDI and Technology Transfer in place

MoI

At least 45 million pairs of footwear produced and around 12 million pairs exported annually

MoI, TEPC, LFGMAN, Private Sector

Export of footwear diversified, thereby share of export to India dropped to about 70 percent Workers provided trainings on footwear by CTEVT

TEPC, LFGMAN

56

MoI, MoC, MoAD

CTEVT, MoE, MoI

Development Impacts, Outcomes, Actions (and also other NTIS products) in CTEVT training courses Action 3: Take strong anti-piracy measures against counterfeit imports Action 4: Rationalize tariff rules Action 5: Develop a separate sector policy and strategy Action 6: Establish a a strong supply chain of the sector Action 7: Ensure easy access to finance for investing in machinery and technology Action 8: Provide incentives for investment in technology and machinery at par with neighboring competitors Action 9: Empower LFGMAN to provide useful business intelligence to the private sector for both domestic and export markets

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

Responsible Agencies

Cheap pirated shoes have been major competitors for Nepalese authentic brands

Pirated footwear controlled and effective competition established

MoI, MoC

At present, tariffs of raw materials are higher than that of finished goods The footwear sector lacks sector policy and strategy

Tariff rates for raw materials imported will be rationalized Separate sector policy and strategy developed

MoF, DoC

The sector lacks a well-developed supply chain

A supply chain strategy developed and implemented

MoI, TEPC, LFGMAN

Small producers cannot access bank financing to invest in equipment

A soft loan program established to investment financing in small producers

MoF, NRB

Incentives for investment are not comparable with those offered by India, Bangladesh, Pakistan, Sri Lanka or China

Incentives to investment in the sector at par with neighboring competitors ensured

MoF, MoI

LFGMAN capacity to provide business intelligence is weak

LFGMAN capacity in the area of business intelligence and marketing developed

LFGMAN, TEPC

57

MoI, TEPC, LFGMAN

Development Impacts, Outcomes, Actions

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

Medium Term Actions: 2018-2020 Action 1: The sector lacks the of a footwear Establish a footwear research institute research institute to the sector Action 2: There is no common facility to provide Establish common small producers access to production production/processing equipment facilities Outcome 15: Chyangra Exports of Chyangra Pashmina products Pashmina were nearly $30 million in 2013 Exports of Chyangra Pashmina products expanded significantly Short Term Actions: 2016-2017 Action 1: The sector lacks a clear quality standard Ensure an internationally although work has started on it. A MoU is recognized Quality Mark in place between MBSM and NPIA for from NBSM for Nepalese testing. NBSM can test for some Pashmina parameters on fiber, yarn and fabric but has yet to be accredited. Work has started on international accreditation. Action 2: NBSM lacks capacity to test for presence Ensure internationally of restricted Azo dyes recognized certificate from NBSM confirming use of non-harmful Azo dyes Action 3: NPIA and GoN lack a plan to promote Develop a clear plan of Nepali Pashmina in new potential markets action to promote Nepali Pashmina in new

Responsible Agencies

A strong research institute established to technological development and innovation

MoI, LFGMAN

Common production/processing facilities set up with from GoN

MoC, MoI

Exports of Chyangra Pashmina products reached to $50 million

NPIA, Private Sector, MoI, MoAD, MoC

 

A Nepali quality standard developed. NBSM been capable to test and internationally accredited for full scope of fiber, yarn and fabric testing  NBSM able to issue a Quality Mark in conjunction with the use of the Collective Mark NBSM capable to test for presence of restricted Azo dyes and able to issue internationally recognized certificate of conformity to Pashmina exporters

NBSM



NPIA, MoC, TEPC, Private sector



A concrete plan of action for promoting Nepalese Pashmina in new market developed and being implemented Exports of Nepalese Pashmina in new

58

NBSM, NPIA

Development Impacts, Outcomes, Actions

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) markets markets being grown Action 4: NPIA has ed the Chyangra An explicit campaign developed to Promote Chyangra Pashmina collective mark in 40 markets and promote the Chyangra Pashmina Pashmina collective mark but there is little promotion of the brand as collective mark in key target markets in international markets of yet Medium Term Actions: 2018-2020 Action 1:  There is no clear Government plan to About 150,000 Chyangra raised in 2020 Develop and implement a expand domestic Chyangra wool plan to expand domestic production for pashmina production of Chyangra  There were approximately 70,000 wool significantly Chyangra raised as of 2014 Action 2: There are few Chyangra wool collection More than 50% of Nepal’s Chyangra wool Promote investment in in and yarn processing centers in the hills production processed within the country yarn processing and and mountains. Chyangra farmers sell spinning their wool to Tibet, where it is processed and exported back to Nepal 2014 Baseline

Outcome 16: Knotted US$ 71 million worth of Knotted Carpets Carpets exported in 2013 Exports of Knotted Carpets regained a strong footing through market and product diversification Short Term Actions: 2016-2017 Action 1: The sector lacks a collective trademark Promote collective trademark for the sector in major destination markets

Responsible Agencies

NPIA, MoC, TEPC

MoLS

MoLS,MoI

At least US$ 100 million worth of Knotted Carpets exported

MoI, MoC, Private Sector

A collective trademark established, and ed and promoted in major destination markets

Nepal Carpet Exporters Association (NCEA), TEPC

59

Development Impacts, Outcomes, Actions Action 2: Strengthen NBSM to issue internationally recognized Quality Mark for Nepalese carpet

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) The sector lacks a clear quality standard  A Nepalese quality standard (preferably, internationally harmonized) developed.  A testing facility in PPP model established to issue a Quality Mark in conjunction with the use of the Collective Mark The sector lacks a clear standard for the  A Nepalese standard for the use of use of environmentally-friendly dyes, non-harmful Azo dyes adopted preferably internationally harmonized  A testing facility in PPP model established to issue internationally recognized conformity certificates 2014 Baseline

Action 3: Strengthen NBSM to issue internationally recognized certificate confirming non-harmful Azo dyes in Nepalese carpet Action 4: The sector does not have a rigorous Monitor Quality of system to monitor quality of inputs (such as imported inputs import of recycled wool) effectively Action 5: The sector lacks a rigorous approach to Promote the sector target emerging and fast growing markets especially in emerging importing markets Action 6: Nepali carpets tariff preferences in a Improve market access number of emerging and fast growing in emerging and fast importing markets are limited growing importing markets Medium Term Actions: 2018-2020 Action 1: There is no clear Government plan to Develop and implement expand domestic sheep wool production a plan to grow domestic for carpets. Number of sheep stock as of production of sheep wool 2014 were 7,89,216 significantly

Responsible Agencies NBSM, NCEA

NBSM, NCEA

Systems in place to check the validity of COs and test the quality of inputs

NBSM, NCEA

A rigorous approach and intervention to target emerging and fast growing markets in place

NCEA, MoC, TEPC

More favorable tariff preferences negotiated in key emerging importing markets such as Saudi Arabia, United Arab Emirates, Mexico, Brazil, Malaysia, Indonesia

MoC, NCEA

 A plan to promote sheep raising developed and implemented  Number of sheep raised increased by 20 %

MoAD, DLS

60

Development Impacts, Outcomes, Actions Action 2: Provide adequate training for product development Outcome 17: Skilled &Semi-Skilled Professionals Services at various categories Proportion of skilled/semi-skilled professionals in total outmigration increased and remittance inflow efficiently utilized

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) Training for design and weaving is mostly A carpet weaving curriculum developed by informal on-the-job training the CTEVT and being implemented by the sector with Government Based on Economic Survey, 2015, about At least 40% of migrant workers work as 26% of migrant workers work as skilled skilled and semi-skilled professionals in and semi-skilled professionals in destination countries destination countries 2014 Baseline

Approximately 22% of returning immigrants own their own business

Short Term Actions: 2016-2017 Action 1: Nepal has signed bilateral Negotiate with agreement/MoUs with 5 destinations destination countries to countries as of 2014 improve work environment for Nepalese workers Action 2: Migrant workers are forced to borrow from Provide soft loan to semi- informal money lender to finance their skilled human resources travel at high rates because of lack of for foreign employment formal channels Action 3: Nepal has deployed Labor Attaches in 8 Improve government Nepalese Embassies in key destination assistance to Nepalese countries workers employed overseas

Responsible Agencies CTEVT, NCEA,

At least 40% of returning immigrants engaged in their own business

MoLE, Foreign Employment Agencies Association of Nepal CTEVT MoLE, MoI, MoYS, MoF,

Additional 7 bilateral agreement/MoUs signed with destinations countries

MoFA, MoC, MoLE

Semi-skilled human resources benefiting from soft loan provided by formal channel while going abroad for foreign employment

NRB, MoLE,MoF

 

Labor Attaches in additional 5 destination countries deployed. Additional relevant trainings received by all Labor Attaches deployed overseas

61

MoLE, DoFE

Development Impacts, Outcomes, Actions

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

Medium Term Actions: 2018-2020 Action 1: Nepal lacks a robust system to train new Provide relevant migrant workers before departure vocational trainings and orientation to semi-skilled human resources going abroad for foreign employment Action 2: Skills gained by returning migrant workers Utilize skills gained by are underutilized; only 22 % of returnees returnees for national start their own business development Outcome 18: IT Exports of IT & BPO services are Services and Business estimated at US$30-35 million in 2014 Process Outsourcing New market for IT &BPO sector developed and its export increased significantly Short Term Actions: 2016-2017 Action 1: Mandates and responsibilities of MoIC and Ensure a clear oversight MoSTE in the sector are not defined well structure to the and overlapping sector Action 2 : Robust and competitive investment tax Provide incentives to incentives for the sector are lacking attract investment in the sector

Action 3:

Labor market not adapted to needs of

 

A training system for migrant workers established at district level Returnees been utilized as trainers

Responsible Agencies

MoLE, CTEVT

Entrepreneurship loans made available to returnees at affordable rates

NRB, MoLE, MoI

Exports of IT &BPO increased to at least US$100 million

MoIC, MoSTE, MoF, IT &BPO private sector

Clarified mandates and a single government agency defined responsible for supervising the sector

MoIC, MoSTE, OPMCM

A strong set of investment incentives in place for the sector including (1) corporate income tax holiday until 2020; (2) 0% excise tax on imported telecom and computer equipment; (3) 100% ownership and dividend/capital repatriation for foreign investors  BPO services recognized as a 24-

MoF, MoI, NRB

62

MoLE, MoHA, MoI

Development Impacts, Outcomes, Actions Improve labor market for IT &BPO sector as per the needs

Key Performance Indicators Responsible Agencies Target by 2017 (Short-term) and by 2020 (Medium-term) sector hour business employing large number of women for customer  Provisions introduced to allow for night shifts by classifying sector as “public utility” or “essential service” and women safety ensured The cost of bandwidth is 30% higher than The cost of bandwidth reduced to make it MoIC, MoSTE in India at par with India 2014 Baseline

Action 4: Lower the cost of bandwidth Action 5: Current university-level computer science Increase supply of IT programs does not produce graduates with &BPO trained personnel skills demanded by IT &BPO sector Action 6: Only two firms have received CMMI Ensure quality and certification security certification measures for clients Action 7: There is little or no economic data Conduct annual collected by GoN on the IT &BPO sector economic survey of the sector Medium Term Actions: 2018-2020 Action 1: Foreign Investment and Technology Improve legal framework Transfer Act 1992 and Rules not yet for FDI in the sector by amended as per WTO requirements making necessary changes in FDI and Technology Transfer Act and Rules Action 2: Nepal lacks a modern legal framework for Strengthen legal data and privacy protection framework for privacy

“Market ready” graduates with right set of skills made available

MoE, Universities

A significant number of firms in the sector received CMMI certification; output-based subsidies to certification provided

MoF, MoI, Private sector

An annual economic survey of the sector conducted

CBS, TEPC

Foreign Investment and Technology Transfer Act 1992 and Rules amended taking into the needs of IT&BPO sector

MoI, MoC

A comprehensive legal framework for data and privacy protection adopted and being implemented

MoLJPA, MoSTE, OPMCM

63

Development Impacts, Outcomes, Actions protection and addresses needs of IT&BPO overseas clients Action 3: Update legal and regulatory framework for IPR ive of IT &BPO sector Action 4: Strengthen IT &BPO sector through wellstructured and enhanced sector association Action 5: Strengthen IT Park and make it functional Outcome 19: Tourism Number of foreign visitors, their average duration of stay and per capita expenditure increased significantly

2014 Baseline

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term)

Responsible Agencies

PDTA 1965 last amended in 2006

PDTA amended or a new Industrial Property Act adopted; Utility Models, GIs, and other rights incorporated in the amended Act

MoI, OPMCM, MoSTE, MoLJPA

The sector lacks well-structured and enhanced sector association

A sector association formed and functioning well with enhanced capacity

Private sector

The Park remains unoccupied due to lack of fiscal and policy incentives

The IT Park declared a specialty SEZ with fiscal and policy incentives and several firms relocated to it  Foreign visitors increased to at least 1,344,000  Length of stay increased to 15 days with per capita expenditure of US$ 2049  2 million foreigners visiting Nepal in 2020 (as per goal of Vision 2020)

MoIC, MoSTE, MoI, NIB

797,616 international tourists arrived in 2013 and spent US$ 42.8 per day per capita staying for around 12 days

Short Term Actions: 2016-2017 Action 1: Nepal lacks a policy to encourage intraEncourage intra-regional regional tourism tourism (within SAARC and with China) Action 2: Currently significant number of tourism unlicensed service providers are operating without tourism service providers government licenses after careful appraisal

MoTCA, NTB, NAC, TIA, CAAN, NATHM, HAN, NATO, SOTTO, NMA and other private sectors

Proper provision in Aviation Policy to encourage intra-regional tourism in place

MoCTCA, CAAN

No unauthorized tourism service providers remained

NTB, Private Sector

64

Development Impacts, Outcomes, Actions Action 3: Develop new tourism circuits Action 4: Decentralize operations (program and activities) of NATHM Action 5: Develop a new Tourism Investment Regulation Action 6: Assign Tourism Attaché in Nepalese missions abroad Action 7: Design and Implement Hygiene Code for Hotel and Restaurant Operators Action 8: Enhance capacity of Nepalese Missions abroad to promote tourism Action 9: Develop and implement an overseas commercial presence policy and plan Action 10: Open new peaks for mountain climbing

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) Existing circuits are overcrowded causing Detailed outline on new circuits as well as social and environmental pressures early operationalization of new circuits completed Currently NATHM conducts its program Regional branches (at least 3) of NATHM and activities only in Kathmandu opened in major tourist hubs 2014 Baseline

At present FDI in the sector is low and Nepalese firms cannot operate outside

Responsible Agencies MoTCA, NTB

NATHM, MoTCA, NTB

FDI in tourism increased significantly and Nepalese firms established their commercial presence abroad Tourism Attaché assigned in important tourism markets

MoTCA, MoF, MoI

There is an absence of health and hygiene code that meets international standards

Hygiene Code developed and Hotel Restaurant Rules 2036 amended accordingly

MoTCA, NTB

Personnel in overseas embassies and missions lack capacity to promote tourism in Nepal

A tourism promotion included in Economic Diplomacy of Nepal and a significant number of personnel working in mission trained about this sector

MoFA, MoCTCA

Nepalese tourism operators lacks overseas presence

A policy and plan to encourage overseas commercial presence of Nepalese tourism operators in place

MoCTCA, MoF, MoC, NTB, Private sector

Currently there is no Tourism Attaché in Nepalese missions abroad

Nepal offers access for climbing to only a few peaks at high fees. Out of 1310 peaks above 6,000 meters, only 326 are open for climbing

 

New peaks opened for climbing and the cost lowered At least 500 peaks opened for climbing

65

MoFA, MoTCA

MoCTCA, MoF, NTB

Development Impacts, Outcomes, Actions

Key Performance Indicators Target by 2017 (Short-term) and by 2020 (Medium-term) Hotel and Restaurant Rules 2036 not yet Hotel and Restaurant Rules 2036 updated amended to include hygiene code and international standards of operation 2014 Baseline

Action 11: Ensure food safety and international standards of three-star and above facilities Action 12: Securing visas for short term visits at Extend Nepalese visas borders is burdensome and expensive for tourists visiting India and China Medium Term Actions: 2018-2020 Action 1: Enhance capacity of Nepal lacks quality manpower for the human resources tourism sector engaged in tourism sector Action 2: At present, new and additional investment Incentivize investment in in the sector is low the sector Action 3: There are few community-based tourism Develop communityproducts in rural settings based tourism products Action 4: A ten-year strategic plan to implement Adopt and implement a Vision 2020 is being developed by plan to Vision MoCTCA and NTB 2020 Action 5: There is limited cooperation between NTB Develop new sites & and local authorities to develop new sites activity products tly by products and activities NTB & local governments

Responsible Agencies MoCTCA, OPMCM, DFTQC

Short term visas easily extended to encourage extension of visit to Nepal by third country tourists visiting India and China

Department of Immigration

NATHM's operation expanded to regional levels

MoCTCA, MoE, NATHM

Tourism Economic Zones with various incentive packages to attract higher investments created A policy to develop community-based tourism products including eco-tourism in rural settings adopted The ten-year strategic plan to implement Vision 2020 adopted and being implemented

MoF, MoTCA

NTB collaborating with a number of local authorities to develop new tourism products

NTB, Local Government

66

MoCTCA, NTB

MoCTCA, NTB